EXHIBIT 2.1
-----------
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
M & F WORLDWIDE CORP.
AND
HONEYWELL INTERNATIONAL INC.
OCTOBER 31, 2005
TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE OF SHARES..........................................1
1.1 Purchase and Sale of Shares........................................1
1.2 Purchase Price.....................................................1
ARTICLE II CLOSING; CLOSING DELIVERIES.........................................1
2.1 Closing Date.......................................................1
2.2 Closing Deliveries.................................................2
2.3 Working Capital Adjustment.........................................2
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HONEYWELL........................4
3.1 Corporate Status...................................................4
3.2 Authority..........................................................5
3.3 No Conflict; Government Authorizations.............................5
3.4 Capitalization.....................................................6
3.5 Financial Statements...............................................7
3.6 Absence of Certain Changes; Undisclosed Liabilities................7
3.7 Taxes.............................................................10
3.8 Intellectual Property.............................................12
3.9 Legal Proceedings.................................................15
3.10 Compliance With Laws; Permits.....................................15
3.11 Environmental Matters.............................................16
3.12 Employee Matters and Benefit Plans................................17
3.13 Material Contracts................................................20
3.14 Material Customers and Suppliers..................................22
3.15 Properties........................................................22
3.16 Sufficiency of Assets.............................................24
3.17 Labor and Employment..............................................24
3.18 Insurance.........................................................25
3.19 Finder's Fee......................................................25
3.20 Transactions With Affiliates......................................25
3.21 No Reliance.......................................................26
3.22 Disclaimer of Other Representations and Warranties................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER........................27
4.1 Corporate Status..................................................27
4.2 Authority.........................................................27
4.3 No Conflict; Required Filings.....................................27
4.4 Legal Proceedings.................................................28
4.5 Sufficient Funds..................................................28
4.6 No Reliance.......................................................28
4.7 Investment Intent.................................................29
4.8 Finder's Fee......................................................30
4.9 Disclaimer of Other Representations and Warranties................30
ARTICLE V COVENANTS...........................................................30
5.1 Interim Operations of the Company.................................30
5.2 Filings With Governmental Authorities.............................32
5.3 Consents..........................................................33
5.4 Confidentiality; Access to Information............................34
5.5 Publicity.........................................................34
5.6 Books and Records.................................................35
5.7 Further Action....................................................35
5.8 Expenses..........................................................35
5.9 Notification of Certain Matters...................................36
5.10 Employees and Employee Benefit Plans..............................36
5.11 Indebtedness; Intercompany Accounts...............................37
5.12 Insurance Matters.................................................40
5.13 Non-solicitation of Employees.....................................42
5.14 Non-competition...................................................42
5.15 Sps Confidential Information......................................43
5.16 Other Transactions................................................44
5.17 Financing.........................................................44
5.18 Closing Cash Balance..............................................47
5.19 Transition Services...............................................48
5.20 Future Transaction................................................48
ARTICLE VI CLOSING CONDITIONS.................................................49
6.1 Conditions to Obligations of Honeywell and Purchaser..............49
iii
6.2 Additional Conditions to Obligations of Purchaser.................49
6.3 Additional Conditions to Obligations of Honeywell.................51
ARTICLE VII CERTAIN TAX MATTERS...............................................51
7.1 Tax Returns.......................................................51
7.2 Cooperation On Tax Matters; Tax Audits and Contests...............53
7.3 Tax Sharing Agreements............................................54
7.4 Tax Indemnifications..............................................54
7.5 Tax Indemnification Procedures....................................56
7.6 Certain Taxes.....................................................56
7.7 Tax Refunds.......................................................57
ARTICLE VIII TERMINATION......................................................57
8.1 Termination.......................................................57
8.2 Effect of Termination and Abandonment.............................58
ARTICLE IX NO SURVIVAL; INDEMNIFICATION.......................................58
9.1 Survival of Representations, Warranties and Agreements............58
9.2 Indemnification...................................................59
9.3 Indemnification Procedures........................................59
9.4 Indemnification Limitations.......................................61
ARTICLE X MISCELLANEOUS.......................................................64
10.1 Notices...........................................................64
10.2 Certain Definitions; Interpretation...............................65
10.3 Severability......................................................71
10.4 Entire Agreement; No Third-party Beneficiaries....................71
10.5 Amendment; Waiver.................................................72
10.6 Binding Effect; Assignment........................................72
10.7 Disclosure Schedule...............................................72
10.8 Governing Law.....................................................72
10.9 Dispute Resolution; Mediation; Jurisdiction.......................72
10.10 Certain Transactions..............................................74
10.11 Certain Actions...................................................74
10.12 Construction......................................................78
10.13 Counterparts......................................................78
iv
INDEX OF DEFINED TERMS
TERM PAGE
---- ----
Affected Employees............................................................36
Affiliate.....................................................................65
Affiliate Transactions........................................................26
Affiliated Group..............................................................65
Agreement...............................................................Preamble
Closing........................................................................1
Closing Date...................................................................2
COBRA.........................................................................18
Code..........................................................................65
Company.................................................................Recitals
Competing Business............................................................42
Confidentiality Agreement.....................................................34
Contest.......................................................................53
Continuing Noncompliance......................................................63
Contract......................................................................65
control.......................................................................65
Customer Information..........................................................15
D&O Policies..................................................................41
Debt Commitment Letter........................................................28
Debt Financing................................................................44
Debt Financing Historical Financial Information...............................45
Debt Financing Pro Forma Information..........................................46
Deductible Amount.............................................................61
Direct Contract...............................................................65
Disclosure Schedule............................................................4
Dispute.......................................................................72
DOJ...........................................................................65
DOL...........................................................................17
Effective Time.................................................................2
Eligible Bank.................................................................75
Encumbrances..................................................................24
Environmental Claims..........................................................16
Environmental Laws............................................................17
ERISA.........................................................................65
ERISA Affiliate...............................................................66
ERISA Affiliate Liability.....................................................66
Exchange Act...................................................................5
Excluded Liabilities..........................................................59
Excluded Representations......................................................61
Final Net Working Capital......................................................2
Financial Statements...........................................................7
v
FTC...........................................................................66
GAAP...........................................................................7
Governmental Authority........................................................66
Governmental Order............................................................66
HIPAA.........................................................................19
Honeywell...............................................................Preamble
HSR Act........................................................................5
Improvements..................................................................23
Indebtedness..................................................................66
Indemnified Party.............................................................59
Indemnifying Party............................................................59
Independent Accounting Firm...................................................67
Intellectual Property.........................................................14
Interim Financial Statements...................................................7
IP Licenses...................................................................14
IRS...........................................................................11
Key Customers.................................................................22
Key Suppliers.................................................................22
knowledge.....................................................................67
L/C Termination Date..........................................................76
Labor Laws....................................................................24
Law...........................................................................67
Leased Real Property..........................................................23
Letter of Credit..............................................................75
Liability.....................................................................67
Losses........................................................................67
Made Available................................................................67
MAFCO Letter..................................................................28
Management....................................................................63
Material Contract.............................................................21
Materials of Environmental Concern............................................17
Mediation Request.............................................................73
Net Consideration.............................................................48
Net Working Capital...........................................................68
Novar Group...................................................................45
Novar Guarantees..............................................................39
Novar USA...............................................................Recitals
Occurrence Policies...........................................................41
Off-the-Shelf Software........................................................68
Other Guarantees..............................................................39
Other New Guarantees..........................................................75
Outside Date..................................................................57
Owned Real Property...........................................................22
Partner Contract..............................................................68
Permit........................................................................68
Permitted Encumbrances........................................................68
vi
Permitted Holding Company Liabilities.........................................10
Person........................................................................69
Plans.........................................................................17
Preliminary Net Working Capital................................................2
Preliminary Working Capital Statement..........................................2
Prime Rate.....................................................................4
Privacy Policy................................................................14
Procedure.....................................................................73
Property......................................................................23
Purchase Price.................................................................1
Purchased Entities............................................................11
Purchaser...............................................................Preamble
Purchaser Indemnified Parties.................................................59
Purchaser Material Adverse Effect.............................................69
Real Property Leases..........................................................23
Recent Financial Statements...................................................45
Reference Date................................................................69
Restructuring Transactions....................................................74
Run-Off Coverage..............................................................41
SEC...........................................................................10
Selected Financial Information................................................47
Self-Help Mechanism...........................................................69
Seller..................................................................Preamble
Seller Indemnified Parties....................................................59
Shares..................................................................Recitals
Space Leases..................................................................23
Specified Accounting Policies.................................................69
SPI Group......................................................................7
SPS Balance Sheet..............................................................7
SPS Business..................................................................69
SPS Confidential Information..................................................43
SPS Divestiture...............................................................48
SPS Material Adverse Effect...................................................70
Straddle Periods..............................................................52
Subsidiary....................................................................70
Survival Period...............................................................58
Tangible Property.............................................................23
Tax Benefit...................................................................61
Tax Loss......................................................................54
Tax Losses....................................................................54
Tax Return....................................................................70
Tax Sharing Agreements........................................................11
Taxes.........................................................................70
Taxing Authority..............................................................71
Terminable Guarantees.........................................................39
Third-Party Claim.............................................................59
vii
Unauthorized Code.............................................................71
Voluntary Environmental Investigation.........................................63
WARN Act......................................................................19
Year-End Financial Statements..................................................7
viii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made this 31st day
of October, 2005, by and between M & F Worldwide Corp., a Delaware corporation
("PURCHASER"), and Honeywell International Inc., a Delaware corporation
("HONEYWELL" or the "SELLER").
WHEREAS, Honeywell owns all of the issued and outstanding shares of
capital stock (the "SHARES") of Novar USA Inc., a Delaware corporation ("NOVAR
USA" or the "COMPANY");
WHEREAS, Novar USA, together with its divisions and Subsidiaries, own
or hold the assets, rights, obligations and liabilities comprising the SPS
Business; and
WHEREAS, upon the terms and subject to the conditions contained in this
Agreement, Purchaser desires to acquire from the Seller the Shares, and the
Seller desires to sell to Purchaser the Shares.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions of this Agreement, at the Closing (as defined below), Honeywell shall
sell, assign, transfer, convey and deliver to Purchaser the Shares free and
clear of all Encumbrances, and Purchaser shall deliver to Honeywell the Purchase
Price.
1.2 PURCHASE PRICE. The aggregate purchase price (the "PURCHASE
PRICE") to be paid for the Shares acquired by Purchaser pursuant to this
Agreement shall be Eight Hundred Million Dollars ($800,000,000) in cash, subject
to adjustment pursuant to Section 2.3. At the Closing, Purchaser shall deliver
the Purchase Price to Honeywell by wire transfer of immediately available funds
pursuant to the wire transfer instructions that will be provided by Honeywell
not later than three (3) days prior to the Closing Date.
ARTICLE II
CLOSING; CLOSING DELIVERIES
2.1 CLOSING DATE. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at 10:00 a.m., local time, at
the New York offices of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP, 1285
Avenue of the Americas, New York, New York, five (5) business days following
satisfaction or waiver of all conditions to Closing set forth in Article VI
(other than those conditions that by their nature have to be satisfied at
Closing (but subject to the satisfaction or waiver of those conditions)), or at
such other place and time as the parties may agree; PROVIDED, HOWEVER, that
notwithstanding the foregoing, the Closing, at Purchaser's election, shall
not occur prior to a date that is sixty (60) days from the date that the Recent
Financial Statements are delivered to Purchaser. The date on which the Closing
will occur is referred to herein as the "CLOSING DATE." Assuming that the
Closing occurs in accordance with the preceding sentence, the transfer of the
Shares pursuant to Section 1.1 shall be deemed to have become effective at 12:01
a.m., in each relevant time zone where assets of the Company are located on the
Closing Date (the "EFFECTIVE TIME").
2.2 CLOSING DELIVERIES. At the Closing, (a) Purchaser shall
deliver to Honeywell (i) evidence of the wire transfers referred to in Section
1.2 and (ii) the certificate required to be delivered pursuant to Section 6.3(c)
and (b) Honeywell shall deliver to Purchaser (i) stock certificates for the
Shares, which certificates shall be duly endorsed to Purchaser or accompanied by
duly executed stock powers, (ii) written resignations, in form and substance
reasonably satisfactory to Purchaser, of those officers and directors of the
Company and its Subsidiaries that are employees of Honeywell or any of its
Subsidiaries (other than the Company and the Subsidiaries of the Company) and
such other directors identified by Purchaser not later than three (3) days prior
to Closing, and (iii) the certificate required to be delivered pursuant to
Section 6.2(c).
2.3 WORKING CAPITAL ADJUSTMENT.
(a) Within 90 days following the Closing Date, Purchaser
and the Company shall prepare and deliver to Honeywell (i) a statement (the
"PRELIMINARY WORKING CAPITAL STATEMENT") setting forth a calculation of the Net
Working Capital (the "PRELIMINARY NET WORKING CAPITAL") and (ii) a calculation
of the amount Purchaser asserts is due and owing in accordance with Section
2.3(e). The "FINAL NET WORKING CAPITAL" shall be the Preliminary Net Working
Capital shown on the Preliminary Working Capital Statement, as modified pursuant
to this Section 2.3.
(b) Unless Honeywell notifies Purchaser in writing that
Honeywell disagrees with any items included in the Preliminary Working Capital
Statement (such notice to include Honeywell's objections and reasonably detailed
proposed revisions to said documents and in reasonable detail the basis therefor
along with any relevant supporting data), within thirty (30) days after receipt
thereof, the Preliminary Working Capital Statement shall be conclusive and
binding on the parties and shall be the Final Net Working Capital, it being
understood that Honeywell shall not thereafter be entitled to alter the scope or
amount of any such disputed items (it being understood that this sentence shall
not preclude any later agreement of Honeywell and Purchaser with respect to any
item relating to the Preliminary Working Capital Statement or the Final Net
Working Capital). Any items which are not disputed in writing by Honeywell
pursuant to the preceding sentence shall be deemed agreed in all respects by
Honeywell and shall be conclusive and binding upon the parties. If Honeywell so
notifies Purchaser in writing within such thirty (30) day period, then Honeywell
and Purchaser shall attempt to resolve their differences with respect thereto
within fifteen (15) days after Purchaser's receipt of Honeywell's written notice
of disagreement. If Honeywell and Purchaser resolve their differences with
respect to the Preliminary Working Capital Statement within such fifteen (15)
day period, then the Preliminary Working Capital Statement, with such
modifications necessary to reflect such agreement
2
of Honeywell and Purchaser, shall be conclusive and binding on the parties and
shall be the Final Net Working Capital. Any disputes not resolved by Honeywell
and Purchaser within such fifteen (15) day period regarding the Preliminary
Working Capital Statement will be resolved by an Independent Accounting Firm
jointly retained by Honeywell and Purchaser. Honeywell and Purchaser shall seek
to retain the Independent Accounting Firm not later than the last day of such
fifteen (15) day period. The Independent Accounting Firm shall make a
determination on the disputes so submitted as well as such modifications, if
any, to the Preliminary Working Capital Statement and the Final Net Working
Capital to reflect such determination, and the same shall be conclusive and
binding upon the parties. The determination of the Independent Accounting Firm
for any item in dispute cannot, however, be in excess of, nor less than, the
greatest or lowest value, respectively, claimed for that particular item in the
Preliminary Working Capital Statement, in the case of Purchaser, or in the
notice described in the first sentence of this paragraph, in the case of
Honeywell. The fees and expenses of the Independent Accounting Firm shall be
shared equally by Honeywell and Purchaser. The Independent Accounting Firm shall
be instructed to render its decision in accordance with the terms hereof,
including the Specified Accounting Policies.
(c) In connection with Honeywell's review of the
Preliminary Working Capital Statement, Honeywell and its representatives shall
have reasonable access, during normal business hours and upon reasonable notice,
to all relevant work papers, schedules, memoranda and other documents prepared
by Purchaser or the Company or their respective representatives, subject to
customary indemnification, confidentiality and other agreements that may be
requested by such representatives, and to the books and records, the financial
systems and finance personnel and any other information of the Company and its
Subsidiaries that Honeywell reasonably requests, and Purchaser shall, and shall
cause its Subsidiaries, including the Company and its Subsidiaries, to cooperate
reasonably with Honeywell and its representatives in connection therewith.
(d) Not later than thirty (30) days after the engagement
of the Independent Accounting Firm (as evidenced by its written acceptance by
facsimile or otherwise to the parties), the parties shall submit simultaneous
briefs to the Independent Accounting Firm (with a copy to the other parties)
setting forth their respective positions regarding the issues in dispute, and
not later than thirty (30) days after the submission of such briefs the parties
shall submit simultaneous reply briefs (with a copy to the other parties). The
Independent Accounting Firm shall render its decision resolving the dispute
within thirty (30) days after submission of the reply briefs. If additional
briefing, a hearing, or other information is required by the Independent
Accounting Firm, the Independent Accounting Firm shall give notice thereof to
the parties as soon as practicable before the expiration of such thirty (30) day
period, and the parties shall promptly respond with a view to minimizing any
delay in the decision date.
(e) In the event that the Final Net Working Capital is
greater than Nineteen Million Dollars ($19,000,000), Purchaser shall pay to
Honeywell the amount of such excess, together with interest thereon from the
Closing Date to the date of payment at a rate equal to the U.S. dollar prime
rate, as announced by The Bank of New
3
York as of the Closing Date (the "PRIME RATE"), by wire transfer in immediately
available funds, not later than five (5) business days after the Final Net
Working Capital has been agreed to or deemed to be agreed to by, or has been
delivered by the Independent Accounting Firm to, Purchaser and Honeywell
pursuant to this Section 2.3. In the event that the Final Net Working Capital is
less than Nineteen Million Dollars ($19,000,000), Honeywell shall pay to
Purchaser the amount of such deficit (such deficit to include the amount of any
negative Final Net Working Capital), together with interest thereon from the
Closing Date to the date of payment at a rate equal to the Prime Rate, by wire
transfer in immediately available funds, not later than five (5) business days
after the Final Net Working Capital has been agreed to or deemed to be agreed to
by, or has been delivered by the Independent Accounting Firm to, Purchaser and
Honeywell pursuant to this Section 2.3.
(f) For the avoidance of doubt, notwithstanding anything
herein to the contrary, the parties agree that any matter specifically resolved
and reflected as part of Final Net Working Capital under this Section 2.3 shall
not also be recoverable as a Tax Loss pursuant to Article VII or a Loss pursuant
to Article IX to the extent that the amount of such Loss or Tax Loss, as
applicable, is reflected as a current liability in Final Net Working Capital.
For the avoidance of doubt, the parties agree that the adjustments contemplated
by this Section 2.3 shall not be used to challenge the Specified Accounting
Policies used to calculate the Net Working Capital.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HONEYWELL
Honeywell hereby represents and warrants to Purchaser on the date
hereof and at Closing (except to the extent such representations and warranties
are expressly made as of an earlier date, in which case such representations and
warranties are made as of such earlier date), that, except as set forth on the
disclosure schedule delivered by Honeywell to Purchaser concurrently herewith
(the "DISCLOSURE SCHEDULE") (it being understood that any matter set forth in
the Disclosure Schedule shall be deemed disclosed with respect to any section of
this Article III to which the matter relates, so long as the description of such
matter in the Disclosure Schedule plainly and clearly indicates its relevance to
the pertinent section):
3.1 CORPORATE STATUS. The Company and each Subsidiary of the
Company is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and each (a) has all
requisite power and authority to carry on its business as it is now being
conducted, and (b) is duly qualified to do business and is in good standing in
each of the jurisdictions in which the ownership, operation or leasing of its
properties and assets and the conduct of its business requires it to be so
qualified, licensed or authorized, except where the failure to be so qualified,
licensed or authorized would not have an SPS Material Adverse Effect. Honeywell
has Made Available to Purchaser (A) a copy of the certificate of incorporation,
by-laws, regulations or other organizational or governing documents of the
Company and each Subsidiary of the Company, each as in effect on the date
hereof, and (B) copies of the minutes of all meetings of the stockholders, the
boards of directors and each committee
4
of the boards of directors of the Company and each Subsidiary of the Company
held since January 1, 2003 until the date hereof. Neither the Company nor any
Subsidiary of the Company is or, to the knowledge of Honeywell since January 1,
2003, has been in violation of its organizational documents in any material
respect.
3.2 AUTHORITY. All corporate acts and other proceedings (including
any stockholder or board approvals) required to be taken by Honeywell to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been (or, in the case
of actions to be taken at Closing, will be as of the Closing) duly and properly
taken. This Agreement has been duly executed and delivered by Honeywell, and
(assuming due authorization and delivery by Purchaser) this Agreement
constitutes a valid and binding obligation of Honeywell, enforceable against
Honeywell, in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
3.3 NO CONFLICT; GOVERNMENT AUTHORIZATIONS.
(a) The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not (with
or without notice or lapse of time, or both), conflict (or, in the case of
clauses (ii) and (iii) below, materially conflict) with, or result in any
violation of or default under (or, in the case of clauses (ii) and (iii) below,
any material violation or default under), or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under (or, in the case of clauses (ii) and (iii) below, loss of a
material benefit under), or result in the creation of any Encumbrance (not
including Permitted Encumbrances) upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the certificate
of incorporation, by-laws or other organizational or governing documents of
Honeywell, the Company or the Subsidiaries of the Company, (ii) any Material
Contract to which any of Honeywell, the Company or the Subsidiaries of the
Company is party or by which it is bound or (iii) any material Permit,
Governmental Order or, subject to the matters described in clauses (i)-(iii) of
Section 3.3(b), Law applicable to any of Honeywell, the Company or the
Subsidiaries of the Company or their respective property or assets.
(b) No material consent of, or registration, declaration,
notice or filing with, any Governmental Authority is required to be obtained or
made by any of Honeywell, the Company or the Subsidiaries of the Company in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, other than (i) compliance
with and filings under the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "EXCHANGE ACT"), (ii)
compliance with and filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 and the rules and regulations promulgated thereunder (the "HSR
ACT"), (iii) to the extent applicable, compliance with and filings under similar
Laws of foreign jurisdictions other than the United States, and (iv) those
5
that, if not made or obtained, individually or in the aggregate, would not
materially hinder or materially delay the Closing.
3.4 CAPITALIZATION.
(a) Section 3.4(a) to the Disclosure Schedule sets forth
a true and complete list of the authorized and outstanding capital stock, name,
jurisdiction of organization, and record and beneficial owner of the equity
interests of the Company and its Subsidiaries, all of which are duly authorized,
validly issued and fully paid, nonassessable and owned with good and valid title
by such record owner, and free and clear of any and all Encumbrances, except
Encumbrances incurred in connection with the financing of the transactions
contemplated hereby. The Shares constitute all of the issued and outstanding
capital stock of the Company and the shares of the Subsidiaries of the Company
set forth on Section 3.4(a) of the Disclosure Schedule constitute all of the
issued and outstanding capital stock of such Subsidiaries. None of the Shares or
the shares of the Subsidiaries of the Company was issued in violation of any
preemptive rights or rights of first refusal.
(b) There are no existing options, warrants, calls,
rights, subscriptions, arrangements, claims, commitments (contingent or
otherwise) or other agreements of any character to which any of Honeywell, the
Company or the Subsidiaries of the Company is a party, or is otherwise subject,
requiring, and there are no securities of the Company or the Subsidiaries of the
Company outstanding which upon conversion or exchange would require, the
issuance, sale or transfer of any additional shares of capital stock or other
securities of the Company or the Subsidiaries of the Company convertible into,
exchangeable for or evidencing the right to subscribe for or purchase capital
stock or any other securities of the Company or the Subsidiaries of the Company.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to any capital stock of, or other
equity or voting interest in, any of the Company or its Subsidiaries. Neither
the Company nor any Subsidiary of the Company has any authorized or outstanding
bonds, debentures, notes or other indebtedness the holders of which have the
right to vote (or which are convertible into, exchangeable for, or evidencing
the right to subscribe for or acquire securities having the right to vote) with
the stockholders of the Company or any such Subsidiary on any matter. None of
Honeywell, the Company or the Subsidiaries of the Company is a party, or is
otherwise subject, to any voting trust or other voting agreement or any
agreement restricting transfer of the Shares with respect to any of the shares
of capital stock of the Company or the Subsidiaries of the Company or to any
agreement relating to the issuance, sale, repurchase, redemption, transfer,
acquisition or other disposition or the registration of the capital stock of the
Company or the Subsidiaries of the Company.
(c) Other than the Subsidiaries of the Company listed in
Section 3.4(a) to the Disclosure Schedule, there are no joint ventures or other
Persons in which the Company or its Subsidiaries own, of record or beneficially,
any direct or indirect equity or other similar interest or any right (contingent
or otherwise) to acquire the same. All of the Subsidiaries of the Company are,
either directly or indirectly, wholly owned by the Company.
6
3.5 FINANCIAL STATEMENTS.
(a) Attached to Section 3.5 of the Disclosure Schedule
are true and complete copies of (i) the audited consolidated balance sheets of
Security Printing, Inc. and its Subsidiaries (collectively, the "SPI GROUP") as
of December 31, 2004 and December 31, 2003 and the related audited consolidated
statements of income, cash flows and changes in stockholder's equity of the SPI
Group for each of the one-year periods ended December 31, 2004, December 31,
2003 and December 31, 2002 (collectively, the "YEAR-END FINANCIAL STATEMENTS")
and (ii) the unaudited consolidated balance sheet of the SPI Group as of
September 30, 2005 (the "SPS BALANCE SHEET") and the related unaudited
consolidated statement of income, cash flows and changes in stockholder's equity
of the SPI Group for the nine-month period ended September 30, 2005
(collectively, the "INTERIM FINANCIAL STATEMENTS" and, together with the
Year-End Financial Statements, the "FINANCIAL STATEMENTS").
(b) The Year-End Financial Statements present fairly, in
all material respects, the financial position and results of operations and cash
flows of the SPI Group as of the dates thereof and for the periods covered
thereby, in accordance with United States generally accepted accounting
principles ("GAAP"), consistently applied.
(c) The Interim Financial Statements present fairly, in
all material respects, the financial position and results of operations of the
SPI Group as of the dates thereof and for the periods covered thereby, in
accordance with GAAP (subject, in the case of unaudited statements, to normal
year end adjustments).
(d) All accounts receivable of the SPI Group, net of
reserves and allowances, are reflected on the Financial Statements, in each case
at the respective dates of the Financial Statements. All such accounts
receivable of the SPI Group represent sales actually made in the ordinary course
of business and has been accounted for, in all material respects, in accordance
with GAAP.
3.6 ABSENCE OF CERTAIN CHANGES; UNDISCLOSED LIABILITIES.
(a) Except as expressly required by this Agreement, since
the Reference Date and through the date of this Agreement, the Company and its
Subsidiaries have operated in the ordinary course of business consistent with
past practice, and there has not been any:
(i) adoption of any change in their respective
certificates of incorporation or bylaws or other similar organization
or governing documents;
(ii) adoption of a plan or agreement of complete
or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company
or its Subsidiaries;
7
(iii) (A) issuance, sale, transfer, pledge,
disposition or encumbrance of the Shares or any shares of capital stock
of the Subsidiaries of the Company, (B) split, combination, subdivision
or reclassification of the Shares or any shares of capital stock of the
Subsidiaries of the Company, (C) declaration, setting aside or payment
of any dividend or other distribution, other than any dividend or
distribution payable in cash, with respect to the Shares or any shares
of capital stock of the Subsidiaries of the Company or (D) redemption,
purchase or other acquisition, directly or indirectly, of the Shares or
any shares of capital stock of the Subsidiaries of the Company;
(iv) (A) increase of the benefits under any Plans
or modification of any Plan where such modification has a material cost
impact on the Company or its Subsidiaries, except as required by Law,
(B) increase in the rate of compensation payable or paid to officers,
or (C) agreement to pay any incentive, bonus, profit sharing or
severance or retention pay, to any director or officer or, except in
the ordinary course of business consistent with past practice, any
other employee of the Company or its Subsidiaries;
(v) entry into or consummation of any
transaction involving the acquisition of the business, stock, or assets
or other properties of any other Person in an amount greater than
$500,000 per acquisition (or series of related acquisitions) or
$1,500,000 in the aggregate, except for acquisitions of inventory or
other business assets in the ordinary course of business consistent
with past practice;
(vi) sale, lease, license or other disposition of
any assets, tangible or intangible, or property in an amount greater
than $500,000 per disposition (or series of related dispositions) or
$1,500,000 in the aggregate, except pursuant to existing Material
Contracts and except in the ordinary course of business consistent with
past practice;
(vii) other than in the ordinary course of
business consistent with past practice or as otherwise required by the
Code or applicable Laws, (A) making or rescission of any material Tax
election with respect to the Company or its Subsidiaries or filing of
any amended Tax Returns, (B) change in any of its material methods of
reporting income or deductions for Tax purposes, (C) compromise of any
Tax liability of the Company or its Subsidiaries that is material to
the Company and its Subsidiaries or (D) issuance of a waiver to extend
the period of limitations for the payment or assessment of any Tax;
(viii) (A) other than in the ordinary course of
business consistent with past practice, incurrence of any Indebtedness;
(B) assumption, guarantee, endorsement or otherwise becoming liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other Person, except for assumptions, guarantees or
endorsements of the ordinary course obligations of any Subsidiary of
the Company; (C) making of any loans, advances or capital contributions
to or investments in any other Person (other than to Subsidiaries of
8
the Company or customary loans or advances to employees, in each case
in the ordinary course of business consistent with past practice); or
(D) mortgage or pledge of any of its material assets, tangible or
intangible, or creation or sufferance of any material Encumbrance
thereupon (other than Permitted Encumbrances);
(ix) except as may be required as a result of a
change in Law or in GAAP, change in any of the accounting principles or
practices used by the Company and its Subsidiaries;
(x) temporary or permanent termination or
closure of any facility;
(xi) writing up or down of any of the assets of
the Company or its Subsidiaries individually or in the aggregate in
excess of $1,000,000 other than as may be required by GAAP or other
applicable Laws;
(xii) settlement or compromise of any material
claims, actions, suits, investigations or proceedings other than in the
ordinary course of business consistent with past practice or in the
aggregate in excess of $500,000;
(xiii) entry into any Contract that would
constitute a Material Contract outside the ordinary course of business
or any material amendment or modification of, or termination of, any
contract that would constitute a Partner Contract;
(xiv) increase or decrease, in any material
respect, in the capital expenditures of the Company or its Subsidiaries
outside the ordinary course of business and, in any event, not
contemplated by the Company's 2005 capital expenditure budget attached
as Section 5.1(p) of the Disclosure Schedule;
(xv) damage, destruction, or casualty loss
(whether or not covered by insurance) in an amount exceeding $1,000,000
in the aggregate to any asset or property of the Company or its
Subsidiaries which has not heretofore been repaired or restored; or
(xvi) agreement or commitment to do any of the
foregoing.
(b) Since the Reference Date, there has not been an SPS
Material Adverse Effect.
(c) Except as and to the extent reflected on, or
adequately reserved for on, the SPS Balance Sheet (the adequacy of such reserve
to be determined as of the date hereof and as of the Closing) and Liabilities
incurred since the date of the SPS Balance Sheet in the ordinary course of
business consistent with past practice, the Company and its Subsidiaries do not
have any material Liabilities (excluding Liabilities of the type covered by the
representations and warranties set forth in Sections 3.8, 3.9,
9
3.10, 3.11, 3.12 and 3.13(b)). None of the Company, Novar Investments (USA)
Inc., Novar Finance Inc. and Novar Holdco Inc. (nor any of their Subsidiaries
other than Security Printing, Inc. and its Subsidiaries) has (A) any Liabilities
other than (i) Liabilities that will either be terminated or cancelled at or
prior to the Closing or fully reflected as current liabilities in Final Net
Working Capital under this Agreement, (ii) Liabilities reflected in the
Financial Statements or (iii) Liabilities which are incurred by any such entity
solely as a result of its direct or indirect ownership of all of the outstanding
securities of the SPI Group (but only to the extent that such Liabilities are no
greater than the related Liabilities of the SPI Group) (the Liabilities referred
to in clauses (i), (ii) and (iii) above (excluding, for the avoidance of doubt,
any of the Liabilities listed in Section 3.6(c) of the Disclosure Schedule,
other than the Liabilities under the sublease listed in item 7 thereof and, to
the extent provided in Section 5.11(d), the Contract listed in item 8 thereof)
being referred to herein as the "PERMITTED HOLDING COMPANY LIABILITIES") or (B)
any past or current assets or operations with respect to which such entities may
have continuing exposure to liability which is not reflected in the Financial
Statements. Except as set forth in the Financial Statements, neither the Company
nor any of its Subsidiaries maintains any "off-balance sheet arrangement" within
the meaning of Item 303 of Regulation S-K of the Securities and Exchange
Commission (the "SEC"). Based on prior experience, it is Honeywell's good faith
belief that the maximum exposure (without giving effect to any indemnities under
this Agreement) to the Company and its Subsidiaries under the Novar Guarantees
will not exceed, in the aggregate, the amount set forth on Section 3.6(c)(iii)
of the Disclosure Schedule.
3.7 TAXES.
(a) Each of the Company and its Subsidiaries has (i) duly
and timely filed (or there has been filed on its behalf) all material Tax
Returns required to be filed by it (taking into account all applicable
extensions) with the appropriate Taxing Authority, and (ii) paid all Taxes owed
by such companies (whether or not shown as due on any Tax Return). All such Tax
Returns (including information provided therewith or with respect thereto) are
true and correct in all material respects. The unpaid Taxes of the Company and
its Subsidiaries (i) did not, as of September 30, 2005, exceed the reserve for
Taxes (excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the SPS
Balance Sheet, and (ii) will not exceed that reserve as adjusted for the passage
of time through the Closing Date.
(b) For tax years beginning on or after January 1, 2001,
Honeywell, the Company or its Subsidiaries have Made Available to Purchaser
true, correct and complete copies, or pro forma or redacted copies, of all
material Tax Returns filed by or with respect to the Company or its
Subsidiaries, examination reports and statements of deficiencies including the
Company or its Subsidiaries for taxable periods, or transactions consummated,
for which the applicable statutory period of limitations have not expired.
(c) There are no material Encumbrances for Taxes upon any
property or assets of the Company and its Subsidiaries (collectively, the
"PURCHASED
10
ENTITIES"), except for Encumbrances for Taxes that are not due and payable, are
being contested in good faith by appropriate proceedings or may thereafter be
paid without penalty and with respect to which appropriate reserves (if required
by GAAP, determined as of the date hereof and as of the Closing) are being held
by the Company or its Subsidiaries.
(d) There is no audit, examination, deficiency, refund
litigations or proposed adjustment with respect to any amount of Taxes pending
or in progress or threatened with respect to any Taxes of the Purchased
Entities. As of the date hereof, none of the Purchased Entities has received
notice in writing of any claim made by a Taxing Authority in a jurisdiction
where the Purchased Entity does not file a Tax Return, that the Purchased Entity
is or may be subject to taxation by that jurisdiction, where such claim has not
been resolved favorably to the Purchased Entity. All deficiencies for Taxes
asserted or assessed against the Purchased Entities have been fully and timely
paid, settled, disputed or properly reflected in the Financial Statements.
(e) There are no outstanding written requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to any claim for, or the period for the collection or assessment or
reassessment of any Taxes or Tax deficiencies against any of the Purchased
Entities.
(f) Each of the Purchased Entities has each withheld (or
will withhold) from their respective employees, independent contractors,
creditors, stockholders and third parties and timely paid to the appropriate
Governmental Authority proper and accurate amounts in all respects for all
periods ending on or before the Closing Date in compliance with all applicable
information reporting and Tax withholding and remitting requirements under U.S.
federal, state and local, and non-U.S. Tax laws.
(g) None of the Purchased Entities is a party to, is
bound by or has any obligation under any Tax sharing, Tax allocation or Tax
indemnity agreement or similar contract or arrangement (collectively, "TAX
SHARING AGREEMENTS") or has any liability for Taxes of any Person (other than
members of the Affiliated Group filing consolidated federal income tax returns
of which the Company is the common parent) under Treas. Reg. 1.1502-6, Treas.
Reg. 1.1502-78 or similar provision of state, local or foreign law, as a
transferee or successor, by contract, or otherwise.
(h) None of the Purchased Entities has engaged in a
transaction that the Internal Revenue Service (the "IRS") has identified by
regulation or other form of published guidance as a listed transaction, as set
forth in Treas. Reg. 1.6011-4(b)(2).
(i) None of the Purchased Entities has taken any
reporting position on a Tax Return, which reporting position (i) if not
sustained would be more likely than not, absent disclosure, to give rise to a
penalty for substantial understatement of federal income Tax under Section 6662
of the Code (or any similar provision of state, local, or foreign Tax law), and
(ii) has not adequately been disclosed on such Tax Return
11
in accordance with Section 6662(d)(2)(B) of the Code (or any similar provision
of state, local, or foreign Tax law).
(j) None of the Purchased Entities has constituted a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for
tax-free treatment under Section 355 of the Code (i) in the two years prior to
the date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with this acquisition.
(k) None of the Purchased Entities has agreed, or is
required to make, any adjustment under Section 481(a) of the Code, and no
Governmental Authority has proposed any such adjustment or change in accounting
method.
(l) Any adjustment of Taxes of the Purchased Entities
made by the IRS, which adjustment is required to be reported to the appropriate
state, local, or foreign Governmental Authorities, has been so reported.
(m) None of the Purchased Entities has executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
similar provision of state, local or foreign Law, and none of the Purchased
Entities is subject to any private letter ruling of the IRS or comparable ruling
of any other Governmental Authority.
(n) No power of attorney has been granted by the Seller
or the Purchased Entities related to Taxes of the Purchased Entities, which
power of attorney is currently in force.
(o) No property owned by any of the Purchased Entities
(i) is property required to be treated as being owned by another Person pursuant
to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986, (ii) constitutes "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code or (iii) is "tax-exempt bond financed property"
within the meaning of Section 168(g)(5) of the Code.
(p) None of the Purchased Entities is a direct or
indirect beneficiary of a guarantee of Tax benefits or any other arrangement
that has the same economic effect (including an indemnity from a seller or
lessee of property, or other insurance) with respect to any transaction or Tax
opinion relating to the Purchased Entities.
(q) None of the Purchased Entities owes any "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
3.8 INTELLECTUAL PROPERTY.
(a) Section 3.8(a) of the Disclosure Schedule sets forth
a true and complete list (in all material respects) of (i) all registered
Intellectual Property owned
12
by the Company or its Subsidiaries, and (ii) all applications for such
registrations. As to each item, the Disclosure Schedules specifies, as
applicable, the owner of such item, the jurisdictions in which such item is
issued or registered or in which an application for issuance or registration has
been filed, and the issuance, registration or application numbers and dates with
respect to such item.
(b) The Company and its Subsidiaries own, free and clear
of all Encumbrances (other than Permitted Encumbrances), or have rights to use
all of the Intellectual Property that is material to the current conduct of
their respective businesses.
(c) All of the rights of the Company and its Subsidiaries
in the material Intellectual Property owned by the Company and its Subsidiaries
are valid and enforceable. Each of the Company and its Subsidiaries has taken
all commercially reasonable actions to maintain and protect, in all material
respects, the Intellectual Property owned by or purported herein to be owned by
the Company or any of its Subsidiaries. Each of the Company and its Subsidiaries
has taken reasonable precautions to protect the confidentiality of its trade
secrets.
(d) To the knowledge of Honeywell, the operation of the
respective businesses of the Company and its Subsidiaries as currently conducted
does not, nor does the use, development, sale or license of the products and
services of the Company, dilute, misappropriate or otherwise violate the
Intellectual Property of any third Person.
(e) There are no material claims, actions, suits or
proceedings pending by or before any Governmental Authority against or, to the
knowledge of Honeywell, threatened in writing against, the Company or its
Subsidiaries that (i) contest the right of the Company or any of its
Subsidiaries to use any of the Intellectual Property owned or used by the
Company or any of its Subsidiaries or (ii) oppose or attempt to cancel any
rights of the Company or any of its Subsidiaries in or to any Intellectual
Property.
(f) There is no material claim pending or, to the
knowledge of Honeywell, threatened by the Company or any of its Subsidiaries
against any third Person with respect to any Intellectual Property owned or
licensed by the Company or its Subsidiaries and, to the knowledge of Honeywell,
no third Person is infringing, diluting, misappropriating or otherwise violating
any material Intellectual Property currently owned or used in the conduct of
their respective businesses by the Company or its Subsidiaries.
(g) Subject to the actions to be taken pursuant to
Section 5.3, all material Intellectual Property owned by or licensed to the
Company or its Subsidiaries shall be owned by or licensed to the Company or its
Subsidiaries on substantially identical terms and conditions immediately after
the Closing.
(h) To the knowledge of Honeywell, each consultant
retained by the Company or any of its Subsidiaries to perform product
development activities, has
13
executed an agreement with the Company or the applicable Subsidiary conveying
all rights in Intellectual Property developed by such consultant to the Company
or the applicable Subsidiary.
(i) To the knowledge of Honeywell, no current or former
employee of the Company or its Subsidiaries is in violation of any material term
of any employment agreement, invention assignment agreement, non-competition
agreement or any restrictive covenant relating to the employment of such person
by the Company or any of its Subsidiaries.
(j) Section 3.8(j) of the Disclosure Schedule sets forth
a correct and complete list of all material licenses of Intellectual Property
(other than Off-the-Shelf Software) under which the Company or its Subsidiaries
is a (i) licensor or (ii) licensee (the "IP LICENSES"). The Company and its
Subsidiaries are not in material breach of any IP Licenses. All of the IP
Licenses are, to the knowledge of Honeywell, valid, enforceable and in full
force and effect. Except as set forth in Section 3.8(j) of the Disclosure
Schedule, no consent, approval or other authorization of any party to any
material IP License to the transactions contemplated by this Agreement is
required.
(k) For purposes of this Agreement, "INTELLECTUAL
PROPERTY" means all (i) U.S. and foreign patents and applications therefor and
all divisionals, reissues, renewals, registrations, confirmations,
re-examinations, certificates of inventorship, extensions, continuations and
continuations-in-part thereof, (ii) U.S. and foreign trademarks, trade dress,
service marks, service names, trade names, domain names, brand names, logo or
business symbols, whether registered or unregistered, and pending applications
to register the same, including all extensions and renewals thereof and all
goodwill associated therewith, (iii) U.S. and foreign copyrights in writings,
designs, software, mask works or other works, whether registered or
unregistered, and pending applications to register the same, (iv) confidential
or proprietary know-how, trade secrets, methods, processes, practices, formulas
and techniques and (v) computer software programs and software systems.
(l) All material software owned by the Company or any of
its Subsidiaries performs substantially in conformance with its documentation.
The Company and its subsidiaries have taken commercially reasonable efforts to
implement appropriate policies to prevent the introduction of any Self-Help
Mechanism or Unauthorized Code into such software. To the knowledge of
Honeywell, no person has gained unauthorized access to such software. The
Company and each of its Subsidiaries is in compliance in all material respects
with the applicable business continuity plan, a copy of which has been Made
Available to Purchaser. To the knowledge of Honeywell, none of the software
owned by, or developed by or for the benefit of, the Company or any Subsidiary
contains or requires use of any "open source" code, shareware or other software
that is made generally available to the public without requiring payment of fees
or royalties or does or may require disclosure or licensing of any such
software.
(m) Copies of the respective privacy policies (each, a
"PRIVACY POLICY") of the Company and each of its Subsidiaries regarding the
collection and use of
14
information, including non-public financial information, from customers
("CUSTOMER INFORMATION") in effect with respect to any Customer Information
currently held by the Company or any of its Subsidiaries have been Made
Available to Purchaser. To the knowledge of Honeywell, neither the Company nor
any of its Subsidiaries has collected, received or used any Customer Information
in violation of its applicable Privacy Policy. The Company and each of its
Subsidiaries has commercially reasonable (taking into account the nature of the
information being collected) security measures and safeguards in place to
protect the Customer Information from illegal or unauthorized access, download
or use by its personnel or third parties, and from access, download or use by
its personnel or third parties in a manner violative of Law or the applicable
Privacy Policy and, to the knowledge of Honeywell, no Person has gained
unauthorized access to or made any unauthorized use of any Customer Information.
The Company and each of its Subsidiaries have adopted written information
security programs designed to protect all Customer Information, copies of which
have been Made Available to Purchaser.
(n) The transactions contemplated by this Agreement will
not result in the granting by Purchaser or any of its Subsidiaries of any rights
or licenses to any Intellectual Property of Purchaser or any of its Subsidiaries
(other than the Company and its Subsidiaries) to any third party (including any
covenant not to xxx with respect to any Intellectual Property of Purchaser or
any of its Subsidiaries).
3.9 LEGAL PROCEEDINGS. There are no material claims, actions,
suits, investigations or proceedings pending against or, to the knowledge of
Honeywell, threatened against, the Company or the Subsidiaries of the Company or
any of their respective properties by or before any Governmental Authority. None
of the Company or any Subsidiary of the Company or any of their respective
properties or assets is or are subject to any material Governmental Order and,
to the knowledge of Honeywell, there are no such Governmental Orders threatened
to be imposed. There are no (a) formal governmental inquiries or investigations
pending with respect to which Honeywell or any of its Subsidiaries has received
notice or would generally be expected to receive notice, or to the knowledge of
Honeywell, otherwise pending or threatened relating to, affecting or involving
the SPS Business or (b) to the knowledge of Honeywell, informal governmental
inquiries or investigations, internal investigations or whistle-blower
complaints pending or threatened, relating to, affecting or involving the SPS
Business, except, in the case of clause (b) above, for those that are not
reasonably expected to give rise to material Liability or interfere, in any
material respect, with the conduct of the SPS Business. This representation and
warranty does not apply to environmental matters, which are the subject of
Section 3.11.
3.10 COMPLIANCE WITH LAWS; PERMITS.
(a) Since January 1, 2003, the Company and its
Subsidiaries have been in compliance in all material respects with all Laws
applicable to the SPS Business and none of the Company or its Subsidiaries has
received any written notice of any failure to comply in any material respect
with any such Laws.
15
(b) The Company and its Subsidiaries have obtained all
material Permits that are necessary to the conduct of their respective
businesses as presently being conducted. All Permits are in full force and
effect, except where the failure to be in full force and effect would not
reasonably be expected, individually or in the aggregate, to give rise to
material Liability or interfere, in any material respect, with the conduct of
the SPS Business. To the knowledge of Honeywell, none of the Company or any of
its Subsidiaries is in violation or default (other than immaterial violations or
defaults) of any Permits, other than any such violations or defaults which would
not reasonably be expected, individually or in the aggregate, to give rise to
material Liability or interfere, in any material respect, with the conduct of
the SPS Business. None of the Company or its Subsidiaries has received any
written notification from any Governmental Authority threatening to revoke any
Permit other than revocations which would not reasonably be expected,
individually or in the aggregate, to give rise to material Liability or
interfere, in any material respect, with the conduct of the SPS Business.
(c) The Company and its Subsidiaries are and, within the
last two (2) years have been, in compliance in all material respects with all
applicable provisions of the Xxxxx-Xxxxx-Xxxxxx Act and the rules and
regulations related thereto and other applicable privacy laws and regulations
including those related to the exchange, disclosure or sharing of customer or
personal information or information security.
3.11 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Honeywell, the Company and its
Subsidiaries are and have been (except for any such past noncompliance which
has, along with all related Liabilities for penalties, been resolved) in
compliance with applicable Environmental Laws in all material respects.
(b) There is no Environmental Claim pending or, to the
knowledge of Honeywell, threatened against the Company or its Subsidiaries that
would reasonably be expected to give rise to any material Liability.
(c) There is no condition on any Property, or at any
other location, for which the Company or its Subsidiaries have or will have a
material obligation to undertake any investigation, cleanup or remedial action
pursuant to any Environmental Laws. Except as permitted or allowed pursuant to
any Environmental Law, there are no Materials of Environmental Concern present
on, in, under or migrating from any Property, and no disposal, generation,
release, discharge, spill or treatment of Materials of Environmental Concern has
occurred on, in or under the Property that would, individually or in the
aggregate, reasonably be expected to result in material liability to the Company
or any of its Subsidiaries.
(d) For purposes of this Agreement, (i) "ENVIRONMENTAL
CLAIMS" means any claim, cause of action, or notice by any person or entity
alleging potential liability arising out of, based on or resulting from (A) the
presence, or release into the environment, of any Material of Environmental
Concern at any location, or (B) circumstances forming the basis of any
violation, or alleged violation, of any
16
Environmental Law, (ii) "ENVIRONMENTAL LAWS" means all federal, interstate,
state, local and foreign Laws, effective as of the Closing Date, relating to
pollution or protection of human health, safety, or the environment, including
Laws relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern or products containing or whose
manufacture can result in the formation or dissemination of Materials of
Environmental Concern, and (iii) "MATERIALS OF ENVIRONMENTAL CONCERN" means any
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, radioactive materials, asbestos, petroleum or petroleum products
which are regulated by any Environmental Law or which could form the basis for
Liability under any Environmental Law or principle of common law relating to
pollution or protection of human health, safety or the environment.
3.12 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) Section 3.12(a) of the Disclosure Schedule sets forth
in all material respects a true and complete list, as of the date hereof, of
each employment, retention, bonus, deferred compensation, pension, stock option,
stock purchase, stock appreciation right, phantom stock, equity-based
compensation, incentive, profit-sharing or retirement plan, arrangement or
agreement, each medical, vacation, retiree medical, severance pay plan, and each
other agreement (including any employment, severance, change in control or
similar agreement) or Code Section 125 "cafeteria plan", flexible benefit,
employee loan, educational assistance plan or material fringe benefit plan or
arrangement, in each case that is sponsored, contributed to or maintained by the
Company or any of its Subsidiaries, that affects or covers any current or former
employee of the Company or its Subsidiaries, (including "employee benefit plans"
within the meaning of Sections 3(1), 3(2) and 3(3) of ERISA) (collectively, the
"PLANS"). True and complete copies of the following have been Made Available to
Purchaser by Honeywell: (i) the most recent copy of the Plans, including any
trust instruments or other funding arrangement and insurance contracts forming a
part of any Plans and all amendments thereto, (ii) the two (2) most recent
annual reports filed with any Governmental Authority, including (if applicable)
any Form 5500 together with all schedules, as required, filed with the IRS or
the Department of Labor (the "DOL"), and any financial statements filed with any
Governmental Authority, including (if applicable), any opinions or reports
required by Section 103(e) of ERISA with respect to each Plan, (iii) the most
recent determination letter issued by the IRS for each Plan that is intended to
be "qualified" under Section 401(a) of the Code, (iv) the most recent summary
plan description and any summary of material modifications, or a description of
any material oral communications that have occurred to the knowledge of
Honeywell, as required, for each Plan, (v) the most recent actuarial reports, if
any, relating to each Plan, (vi) the most recent actuarial valuation, study or
estimate of any retiree medical and life insurance benefits plan or supplemental
retirement benefits plan and (vii) for the last three (3) years, all
correspondence with the IRS, the DOL and any other Governmental Authority
regarding the operation or administration of the Plans.
17
(b) With respect to each Plan: (i) if intended to qualify
under Section 401(a) of the Code, such Plan has received a determination letter
from the IRS stating that it so qualifies and that its trust is exempt from
taxation under Section 501(a) of the Code and nothing has occurred to the
knowledge of Honeywell since the date of such determination that would adversely
affect such qualification or exempt status; (ii) such Plan is being administered
in all material respects in accordance with its terms and applicable Law,
including (if applicable) ERISA and the Code; (iii) except for routine claims
for benefits, no liens, lawsuits, complaints or disputes are pending or, to the
knowledge of Honeywell, threatened that give rise to or might reasonably be
expected to give rise to material liability on the part of the Company or any of
its Subsidiaries; (iv) neither the Company nor any of its Subsidiaries nor to
the knowledge of Honeywell, any trustee or any fiduciary of such Plan that is
subject to ERISA or the Code has engaged in any prohibited transaction within
the meaning of Sections 406 or 407 of ERISA or Section 4975 of the Code with
respect to such Plan that could result in the imposition of any material
liability on such Plan or the Company or any of its Subsidiaries; (v) all
contributions required under ERISA and the Code to be made to such Plan as of
the date hereof (taking into account any extensions for the making of such
contributions) have been timely made in full; (vi) if subject to ERISA or the
Code, such Plan is not a "multiemployer plan" within the meaning of Section
3(37) of ERISA or a "multiple employer plan" within the meaning of Section
413(c) of the Code; (vii) there are no proceedings or investigations pending
before the IRS, the DOL or other Governmental Authority with respect to such
Plan, nor to the knowledge of Honeywell is any such proceeding or investigation
threatened (viii) such Plan is not a "multiple employer welfare arrangement" as
defined in Section 3(40) of ERISA; and (ix) such Plan is not maintained outside
the jurisdiction of the United States.
(c) With respect to each Plan all reports, returns,
notices and other documentation that are required to have been filed with or
furnished to the IRS, the DOL, the Pension Benefit Guaranty Corporation, the SEC
or any other Governmental Authority, or to the participants or beneficiaries of
such Plans have been filed or furnished on a timely basis. To the knowledge of
Honeywell, the Company and its Subsidiaries have no direct or indirect
liability, whether absolute or contingent, with respect to any misclassification
of any person as an independent contractor rather than as an employee, or with
respect to any employee leased from another employer.
(d) None of the Company or its Subsidiaries maintains,
contributes to or has any liability, whether contingent or otherwise, with
respect to, and has not within the preceding six (6) years maintained,
contributed or had any liability, whether contingent or otherwise, with respect
to any Plan or other "employee benefit pension plan" (as defined in Section 3(2)
of ERISA) that is, or has been, subject to Title IV of ERISA or Section 412 of
the Code.
(e) None of the Company or its Subsidiaries has any
obligation to provide or make available post-employment welfare benefits or
welfare benefit coverage for any employee or former employee, except as may be
required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), or under the continuation of coverage provisions of the Laws
of any state or locality, and at
18
the expense of the employee or former employee except as otherwise provided in a
written severance agreement with an individual employee or former employee which
has been Made Available to Purchaser. Each Plan which is a "group health plan"
within the meaning of Section 5000(b)(1) of the Code and Section 607(l) of ERISA
has been administered in material compliance with, and the Company has otherwise
complied with, (i) the requirements of the Heath Insurance Portability and
Accountability Act of 1996 ("HIPAA") and the regulations promulgated thereunder;
(ii) COBRA and the regulations promulgated thereunder; and (iii) the Medicare
Secondary Payor Provisions of Section 1862 of the Social Security Act and the
regulations promulgated thereunder.
(f) Neither the Company, its Subsidiaries nor any
organization to which the Company or any of its Subsidiaries is a successor or
parent corporation, within the meaning of Section 4069(b) of ERISA, has engaged
in any transaction described in Sections 4069 or 4212(c) of ERISA.
(g) Neither the Company nor any of its Subsidiaries has
any plan, contract or commitment, whether legally binding or not, to create any
additional employee benefit or compensation plans, policies or arrangements or,
except as may be required by law, to modify any Plan.
(h) The Company has not incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act, and the
regulations promulgated thereunder (collectively, the "WARN ACT"), or any
similar state or local law which remains unsatisfied.
(i) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by this Agreement will
(either alone or in combination with another event) (i) entitle any current or
former employee or officer of the Company or any Subsidiary to severance pay,
unemployment compensation or any other payment that will result in a liability
to the Company, the Subsidiaries or Purchaser, (ii) accelerate the time of
payment or vesting, or trigger any payment or funding, through a grantor trust
or otherwise, or increase the amount of, compensation or benefits due any such
employee or officer or trigger any other material obligation pursuant to, any of
the Plans, (iii) result in any breach or violation of, or a default under, any
of the Plans, or (iv) result in any payment that could individually or in
combination with any other such payment constitute an "excess parachute payment"
to a "disqualified individual" as those terms are defined in Section 280G of the
Code, without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(j) This Section 3.12 contains the sole and exclusive
representations and warranties of Honeywell with respect to the Plans.
19
3.13 MATERIAL CONTRACTS.
(a) Except as set forth in Section 3.13(a) of the
Disclosure Schedule, as of the date hereof, neither the Company nor any of its
Subsidiaries is a party to or bound by any:
(i) Contract that would be required to be filed
by Honeywell as a material contract pursuant to Item 601(b)(10) of
Regulation S-K of the SEC (other than Contracts relating to
compensation of executive officers);
(ii) Contract containing covenants of the Company
or any Subsidiary not to compete in any line of business, industry or
geographical area in any respect;
(iii) Contract which by its terms expressly
creates a partnership or joint venture or similar arrangement;
(iv) indenture, credit agreement, loan agreement,
security agreement, guarantee, letter of credit, note, mortgage or
other evidence of Indebtedness or agreement providing for Indebtedness;
(v) Contract for the sale of any of its material
assets after the date hereof (other than in the ordinary course of
business consistent with past practice);
(vi) collective bargaining agreement, employee
association agreement or other agreement with any labor union, employee
representative group, works council or similar collection of employees;
(vii) Contract between the Company and its
Subsidiaries, on the one hand, and any Affiliate of the Seller (other
than the Company and its Subsidiaries), on the other hand, that involve
amounts of more than $500,000;
(viii) Contract under which the Company and its
Subsidiaries have made payments in excess of $2,500,000 in the last
fiscal year or anticipate making payments in excess of $2,500,000 in
any twelve-month period (other than purchase orders, invoices or
royalty agreements entered into in the ordinary course of business);
(ix) Contract under which the Company and its
Subsidiaries received payments in excess of $5,000,000 in the last
fiscal year or anticipate receiving payments in excess of $5,000,000 in
any twelve (12) month period (other than sales orders or invoices
entered into in the ordinary course of business);
(x) Contract involving any Key Customers or Key
Suppliers, any Partner Contract or any Direct Contract (other than
purchase
20
orders, sales orders or invoices under such Contracts entered into in
the ordinary course of business);
(xi) written Contract containing an obligation to
indemnify any officer or director of Honeywell, the Company or any of
its Subsidiaries or any other Person in connection with the acquisition
(whether by means or merger, stock sale or asset sale) of any Person,
except for any such Contract that was not entered into within the two
(2) year period prior to the date of this Agreement and under which no
claim has been made or, to the knowledge of Honeywell, threatened
during such two (2) year period;
(xii) Contract containing a provision which
provides that any term or terms of such Contract will be no less
favorable either individually or in the aggregate than similar
provisions in any other Contract (except (x) for such provisions that
may exist in any Contract with any Key Customers or Key Suppliers or
any Partner Contract or any Direct Contract or (y) to the extent the
provisions would not reasonably be expected to materially and adversely
affect the SPS Business, individually or in the aggregate);
(xiii) Contract for acquisitions of capital stock
or assets of another Person (whether by merger, stock or asset
purchase) within the eighteen (18) month period prior to the date of
this Agreement or earlier if such Contract (or any related Contract)
contains earn-out provisions or other material provisions that are
still applicable or in effect;
(xiv) any Real Property Lease;
(xv) any agreement under which it has advanced or
loaned any amount to any of its directors, officers or employees; or
(xvi) any material amendment or material
modification to any of the foregoing currently in effect.
Each such Contract described in clauses (i)-(xvi) is referred to herein as a
"MATERIAL CONTRACT".
(b) Neither the Company nor any of its Subsidiaries is
(and, to the knowledge of Honeywell, no other party is) in material default or
violation of any Material Contract. Neither the Company nor any of its
Subsidiaries has received or made any notice or claim of a material default or
violation of any Material Contract. Neither the Company nor any of its
Subsidiaries, as of the date hereof, has received or provided any written notice
of an intention to terminate, not renew or challenge the validity or
enforceability of any Material Contract. To the knowledge of Honeywell, no event
has occurred that, with or without notice or lapse of time or both, would result
in a material default or violation of any Material Contract. Each of the
Material Contracts is in full force and effect, and is the valid, binding and
enforceable obligation of the Company and its Subsidiaries and, to the knowledge
of Honeywell, of the other parties thereto. The
21
Company and its Subsidiaries have performed all respective material obligations
required to be performed by them to date under the Material Contracts. Honeywell
has Made Available to Purchaser true and complete copies of each Material
Contract.
(c) The Company and each of its Subsidiaries has
controls, measures and safeguards in place to provide commercially reasonable
assurance as to the accuracy and timeliness of transactions (including cash,
check, credit card and electronic funds transactions) between (A) the Company or
any of its Subsidiaries, as applicable, on the one hand, and (B) any account
holder of any party (or an Affiliate of any such Person) to a Partner Contract
or Direct Contract, on the other hand, whose financial account the Company or
any of its Subsidiaries, as applicable, may be authorized to debit or credit
under such Partner Contract or Direct Contract or otherwise. For the avoidance
of doubt, the foregoing sentence is not intended to be a representation and
warranty with respect to compliance with the requirements of the Xxxxxxxx-Xxxxx
Act of 2002 and the rules and regulations promulgated thereunder. Neither the
Company nor any of its Subsidiaries has been (during the last twelve (12) months
as of the date hereof), is or, to the knowledge of Honeywell, is expected to be
(in each instance, as of the date hereof and based on notice received from the
other party to such Contract) the subject of an audit, review or investigation
by a party to a Partner Contract or Direct Contract in respect of the
transactions contemplated by such Contracts, other than audits, reviews or
investigations undertaken in the ordinary course of business consistent with
past practice that have not revealed any material defaults or violations.
3.14 MATERIAL CUSTOMERS AND SUPPLIERS. Section 3.14 of the
Disclosure Schedule sets forth a true and complete list of (a) the top 25
customers of the SPS Business (by revenue) during each of the last two (2)
fiscal years and for the first nine (9) months of the current fiscal year (the
"KEY CUSTOMERS") and sets forth opposite the name of such Key Customer the
approximate amount of revenue attributable to such Key Customer during such
period, and (b) the top 25 suppliers of the SPS Business during each of the last
two fiscal years and for the first nine (9) months of the current fiscal year
(the "KEY SUPPLIERS") and sets forth opposite the name of such Key Supplier the
approximate aggregate amounts paid to such Key Supplier during such period.
Since the Reference Date and prior to the date hereof, no Key Customer or Key
Supplier (based on the revenues for the first nine (9) months of the current
fiscal year) has cancelled or otherwise terminated its relationship with the SPS
Business, and neither the Company nor any of its Subsidiaries has received any
written notice from any Key Customer or Key Supplier (based on the revenues for
the first nine (9) months of the current fiscal year) to the effect that any
such Key Customer or Key Supplier intends to terminate or adversely modify in
any material respect its relationship with the SPS Business.
3.15 PROPERTIES.
(a) A true and complete list of all of the real property
owned by the Company and its Subsidiaries is set forth in Section 3.15(a) of the
Disclosure Schedule (collectively, the "OWNED REAL PROPERTY"). Honeywell has
heretofore Made Available to Purchaser true and complete copies of the most
recent surveys for the
22
Owned Real Property in the possession of any of Honeywell, the Company or its
Subsidiaries.
(b) Section 3.15(b) of the Disclosure Schedule contains a
true and complete schedule of all leases and subleases under which the Company
or any of its Subsidiaries use or occupy or have the right to use or occupy, any
real property (collectively, the "REAL PROPERTY LEASES") (the land, buildings
and other improvements covered by the Real Property Leases being herein called
the "LEASED REAL PROPERTY" and, collectively with the Owned Real Property, the
"PROPERTY"), which schedule sets forth the date of and the parties to each Real
Property Lease, and the address of the Leased Real Property covered thereby.
Neither the Company nor its Subsidiaries, as tenant, are in monetary default
beyond any applicable notice and cure periods with respect to the Real Property
Leases with annual base rents of at least $100,000.
(c) Section 3.15(c) of the Disclosure Schedule contains a
true and complete schedule of all leases, subleases, licenses and other
agreements (collectively, the "SPACE LEASES") granting to any person other than
the Company and its Subsidiaries any right to the possession, use, occupancy or
enjoyment of the Property or any portion thereof, which schedule sets forth the
date of and the parties to each Space Lease.
(d) Except as set forth in Section 3.15(d) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries owns or
holds, nor is it obligated under or a party to, any option, right of first
refusal or other contractual right to purchase, acquire, sell or dispose of the
Property or any portion thereof or interest therein.
(e) The Company and its Subsidiaries have good and
marketable title to all machinery, equipment, furniture and other tangible
assets used in the ordinary course of their business and operations that they
purport to own ("TANGIBLE PROPERTY"), free and clear of any Encumbrances other
than Permitted Encumbrances. The Tangible Property is in operating condition and
repair (ordinary wear and tear excepted) and sufficient to operate the SPS
Business in the ordinary course consistent with past practice.
(f) The Company and its Subsidiaries own, lease, sublease
or license all Property and Tangible Property that are used in the ordinary
course of their business and operations.
(g) All material components of all buildings, structures
and other material improvements included within the Owned Real Property and to
the knowledge of Honeywell included within the Leased Real Property that is
actually and physically occupied by the Company or any of its Subsidiaries (the
"IMPROVEMENTS"), including the roofs and structural elements thereof and the
heating, ventilation, air conditioning, systems and facilities included therein,
are in operating condition and repair (ordinary wear and tear excepted) and
sufficient to operate the SPS Business in the ordinary course consistent with
past practice.
23
(h) The Company and the Subsidiaries of the Company have,
as of the Closing Date, good and marketable fee title to the Owned Real Property
and a valid leasehold interest in the Leased Real Property, as provided in the
applicable Lease, in each case, free and clear of any liens, defects,
exceptions, rights of way, restrictions, covenants, claims, similar matters, or
other encumbrance in respect of such property or asset (collectively,
"ENCUMBRANCES"), except for Permitted Encumbrances.
(i) Neither the Company nor any of its Subsidiaries has
received written notice (and with respect to the Leased Real Property, written
notice from the respective landlord) of any pending, threatened or contemplated
condemnation proceeding affecting the Owned Real Property or the Leased Real
Property that is actually and physically occupied by the Company or any of its
Subsidiaries or any part thereof or of any sale or other disposition of such
Leased Real Property or any part thereof in lieu of condemnation.
(j) Since January 1, 2003, no material portion of the
Owned Real Property has suffered during the period of ownership, occupancy or
use of such Owned Real Property by the Company or any of its Subsidiaries, any
material damage by fire or other casualty which has not heretofore been
completely repaired or restored.
3.16 SUFFICIENCY OF ASSETS. The assets of the Company and its
Subsidiaries constitute all of the material assets held by Honeywell and its
Affiliates for use in the SPS Business and are sufficient for the continued
conduct of the SPS Business in substantially the same manner as currently
conducted. The Company and its Subsidiaries, as the case may be, have good title
to or a valid leasehold or similar interest in all tangible assets (other than
Permitted Encumbrances). The tangible leased assets of the Company and its
Subsidiaries are in operating condition and repair (normal wear and tear
excepted) and sufficient to operate the SPS Business in the ordinary course of
business consistent with past practice.
3.17 LABOR AND EMPLOYMENT.
(a) Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or any other labor-related
agreements with any labor union or labor organization applicable to employees of
the Company or its Subsidiaries, nor is any such agreement currently being
negotiated.
(b) The Company and its Subsidiaries are operating the
SPS Business in compliance in all material respects with all Labor Laws. "LABOR
LAWS" means any and all applicable foreign, federal, state and local Law
relating to employment, employment standards, employment of minors, employment
discrimination, health and safety, labor relations, withholding, wages and
hours, workplace safety and insurance and/or pay equity.
(c) Neither the Company nor any of its Subsidiaries is
the subject of, nor, to the knowledge of Honeywell, is there threatened, any
claim reasonably likely to give rise to a material Liability asserting that the
Company or any of its
24
Subsidiaries has committed an unfair labor practice with respect to employees of
the Company or its Subsidiaries located in the United States, nor is there
pending or, to the knowledge of Honeywell, threatened, nor has there been since
December 31, 2003, any organized effort or demand for recognition or
certification or attempt to organize employees of the Company or any of its
Subsidiaries by any labor organization. There is no pending nor, to the
knowledge of Honeywell, threatened labor strike, walk-out, work stoppage,
slowdown or lockout with respect to employees of the Company or any of its
Subsidiaries, and no labor strike, walk-out, work stoppage, slowdown or lockout
has occurred during the two (2) years preceding the date hereof.
(d) As of the date hereof, no employee of the Company or
any of its Subsidiaries, at the officer level or above, has given written notice
to Honeywell, the Company or any of its Subsidiaries that any such employee
intends to terminate his or her employment with the Company or any of its
Subsidiaries. To the knowledge of Honeywell, no employee of the Company or any
of its Subsidiaries is in any material respect in violation of any term of any
employment contract, non-disclosure agreement or noncompetition agreement.
3.18 INSURANCE. Honeywell has Made Available to Purchaser complete
copies of all policies of insurance maintained by the Company and its
Subsidiaries with respect to their properties and assets, or true and complete
summaries of the material terms of such insurance policies. Section 3.18 of the
Disclosure Schedule sets forth a list of all material insurance policies entered
into since October 1, 2002 relating to the SPS Business that are not held by the
Company or its Subsidiaries. Honeywell has Made Available to Purchaser
historical property and casualty claims information with respect to the five
(5)-year period prior to the date hereof indicating pending and paid claims as
of June, 2005. All insurance policies relating to the SPS Business are in full
force and effect and the applicable insured parties have complied in all
material respects with the provisions of such policies. None of Honeywell, the
Company or its Subsidiaries has received: (i) any notice regarding any dispute
by the applicable carrier of any of the existing insurance policies relating to
the SPS Business or regarding any actual or possible adjustment in the amount of
the premiums payable with respect to any of said policies and, to the knowledge
of Honeywell, no such disputes exist; or (ii) any notice from the applicable
carrier regarding any refusal of coverage under, or any rejection of any claim
under, any such policies and, to the knowledge of Honeywell, there is no basis
for any such refusal of coverage or rejection of any such claim.
3.19 FINDER'S FEE. Except for fees payable to the investment banks
of Honeywell, whose fees and expenses in connection with the transaction
contemplated hereby shall be the sole responsibility of Honeywell, none of
Honeywell, the Company or its Subsidiaries has incurred any Liability to any
party for any brokerage or finder's fee or agent's commission, or the like, in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Honeywell, the Company or its Subsidiaries.
3.20 TRANSACTIONS WITH AFFILIATES. Except as described in the
Financial Statements (or notes thereto) and identified as an Affiliate
Transaction in the Financial
25
Statements, since December 31, 2003, neither Honeywell nor any of its Affiliates
(excluding the Company and its Subsidiaries), has been a party to any agreement
with or for the benefit of, or has provided services or benefits to or on behalf
of, or has engaged in any material transactions with, the Company, any of its
Subsidiaries or the SPS Business (other than in the ordinary course of business
and on an arm's-length basis) (all such transactions, "AFFILIATE TRANSACTIONS").
3.21 NO RELIANCE. Honeywell agrees and acknowledges that:
(a) it is a sophisticated seller and has engaged advisors
who are experienced in the purchase and sale of companies of a size comparable
to the Company and its Subsidiaries;
(b) it has agreed to sell the Shares based on its own
inspection, examination and determination with respect to all matters and
without reliance upon any representations, warranties, communications or
disclosures of any nature other than those set forth in this Agreement; and
(c) without limiting the generality of the foregoing,
Honeywell, in entering into this Agreement, is relying solely on this Agreement
including the representations and warranties set forth in this Agreement and,
except as set forth in this Agreement and the certificate contemplated by
Section 6.3(c) and any other certificate that by its terms is delivered
hereunder, none of Purchaser or any other Person makes any representation or
warranty, express or implied, with respect to, and Honeywell expressly disclaims
any reliance on: (i) the accuracy or completeness of any information, written or
oral and in any form provided, which has been made available or which is made
available after the date hereof regarding Purchaser, its respective business and
operations or other related matters; (ii) any projections, estimates or budgets
delivered to or made available to it or any of its agents, advisors, employees
or representatives, or which is made available to it or any of its agents,
advisors, employees or representatives after the date hereof, or future
revenues, expenses or expenditures, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Purchaser or the future business and operations of the
Purchaser and its Subsidiaries (including, after the Closing, the Company and
its Subsidiaries); (iii) any information, written or oral and in any form
provided, made available to Honeywell or any of its agents, advisors, employees
or representatives in presentations, functional "break-out" discussions, oral or
written responses to questions submitted on behalf of Honeywell or other
communications between Honeywell or any of its agents, advisors, employees or
representatives, on the one hand, and Purchaser, any of its Subsidiaries or any
of its agents, advisors, employees or representatives, on the other hand; or
(iv) any other information, written or oral and in any form provided, or
documents previously made available or which are made available after the date
hereof to it or any of its agents, advisors, employees or representatives with
respect to Purchaser or its Subsidiaries, or their respective operations or
other related matters, whether in expectation of the transactions contemplated
by this Agreement or otherwise. Nothing in this Section 3.21 shall be deemed to
limit Honeywell's rights as set forth in this Agreement with respect to the
representations, warranties and covenants set forth in this Agreement.
26
3.22 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Purchaser
agrees and acknowledges that, except as set forth in this Agreement (including
the Disclosure Schedule), Honeywell makes no representation or warranty, express
or implied, at law or in equity, with respect to the Company, its Subsidiaries,
their respective businesses, the past, current or future financial condition or
any of their assets, liabilities or operations, or their past, current or future
profitability or performance, individually or in the aggregate, and any such
other representations or warranties are hereby expressly disclaimed. Without
limiting the generality of the foregoing, Honeywell expressly disclaims any
representation or warranty that is not set forth in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Honeywell on the date
hereof and at Closing (except to the extent such representations and warranties
are expressly made as of an earlier date, in which case such representations and
warranties are made as of such earlier date), as follows:
4.1 CORPORATE STATUS. Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and Purchaser (a) has all requisite power and
authority to carry on its business as it is now being conducted, and (b) is duly
qualified to do business and is in good standing in each of the jurisdictions in
which the ownership, operation or leasing of its properties and assets and the
conduct of its business requires it to be so qualified, licensed or authorized,
except where the failure to have to be so qualified, licensed or authorized
would not have a Purchaser Material Adverse Effect.
4.2 AUTHORITY. All corporate acts and other proceedings (including
any stockholder or board approvals) required to be taken by Purchaser to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions hereby have been duly and properly taken. This
Agreement has been duly executed and delivered by Purchaser, and (assuming due
authorization and delivery by Honeywell) this Agreement constitutes a valid and
binding obligation of Purchaser, enforceable against Purchaser, in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 NO CONFLICT; REQUIRED FILINGS.
(a) The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not (with
or without notice or lapse of time, or both), conflict with, or result in any
violation of or default
27
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a benefit under, or result in the creation of any
Encumbrance upon any of the properties or assets of Purchaser under, any
provision of (i) the certificate of incorporation, by-laws or other
organizational or governing documents of Purchaser, (ii) any Contract to which
Purchaser is party or by which it is bound or (iii) any Governmental Order or,
subject to the matters described in clauses (i) and (ii) of Section 4.3(b), Law
applicable to Purchaser or its property or assets, other than, in the case of
clauses (ii) and (iii) above, any such conflicts, violations, defaults, rights
or Encumbrances that would not have a Purchaser Material Adverse Effect.
(b) No material consent of, or registration, declaration,
notice or filing with, any Governmental Authority is required to be obtained or
made by Purchaser in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby,
other than (i) compliance with and filings under the HSR Act and (ii) those
that, if not made or obtained, individually or in the aggregate, would not
materially hinder or materially delay the Closing or result in a Purchaser
Material Adverse Effect.
4.4 LEGAL PROCEEDINGS. There are no claims, actions, suits,
investigations or proceedings pending or, to the knowledge of Purchaser,
threatened against Purchaser or any of its Affiliates or any of their respective
properties before any Governmental Authority except as would not reasonably be
expected to have a Purchaser Material Adverse Effect.
4.5 SUFFICIENT FUNDS. As of the date of this Agreement, Purchaser
has sufficient funds or written commitments for sufficient funds pursuant to the
Debt Commitment Letter (as defined below) and the MAFCO Letter (as defined
below) and, assuming that the transactions contemplated by the Debt Commitment
Letter and the MAFCO Letter are consummated in accordance with their terms, as
of the Closing shall have sufficient funds, to enable it to pay the Purchase
Price at the Closing as contemplated herein. For purposes hereof, "DEBT
COMMITMENT LETTER" means the commitment letter with respect to the debt
financing of the transactions contemplated hereby, a true and complete copy of
which has been delivered to Honeywell on the date hereof and the "MAFCO LETTER"
means the commitment letter, to be used to fund a portion of Purchaser's equity
commitment in respect of the Purchase Price, a true and complete copy of which
has been delivered to Honeywell on the date hereof.
4.6 NO RELIANCE.Purchaser agrees and acknowledges that:
(a) it is a sophisticated purchaser and has engaged
advisors who are experienced in the purchase and sale of companies of a size
comparable to the Company and its Subsidiaries;
(b) it has agreed to purchase the Shares based on its own
inspection, examination and determination with respect to all matters and
without reliance upon any representations, warranties, communications or
disclosures of any
28
nature other than those set forth in this Agreement (including the Disclosure
Schedule); and
(c) without limiting the generality of the foregoing,
Purchaser, in entering into this Agreement, is relying solely on this Agreement
including the representations and warranties set forth in this Agreement and,
except as set forth in this Agreement, the Disclosure Schedule and the
certificate contemplated by Section 6.2(c) and any other certificate that by its
terms is delivered hereunder, none of Honeywell or any other Person makes any
representation or warranty, express or implied, with respect to, and Purchaser
expressly disclaims any reliance on: (i) the accuracy or completeness of any
information, written or oral and in any form provided, which has been made
available or which is made available after the date hereof regarding the
Company, its Subsidiaries, their respective businesses and operations or other
related matters; (ii) any projections, estimates or budgets delivered to or made
available to it or any of its agents, advisors, employees or representatives, or
which is made available to it or any of its agents, advisors, employees or
representatives after the date hereof, or future revenues, expenses or
expenditures, future results of operations (or any component thereof), future
cash flows or future financial condition (or any component thereof) of the
Company and its Subsidiaries or the future business and operations of the
Company and its Subsidiaries; (iii) any information included in the Confidential
Information Memorandum dated July 2005 (as may be amended) or the draft business
description and industry overview narrative provided to Purchaser, in each case
related to the Company and its Subsidiaries, their respective businesses and
operations or other matters; (iv) any information, written or oral and in any
form provided, made available to it or any of its agents, advisors, employees or
representatives in a "data room" (including on line data rooms), management
presentations, functional "break-out" discussions, oral or written responses to
questions submitted on behalf of it or other communications between it or any of
its agents, advisors, employees or representatives, on the one hand, and the
Company, any of its Subsidiaries or any of its agents, advisors, employees or
representatives, on the other hand (it being understood that this Section 4.6
shall not limit any representation or warranty made by Seller in this Agreement
(including the Disclosure Schedule) with respect to the accuracy or completeness
of information Made Available to Purchaser or any of its agents, advisors,
employees or representatives); (v) the probable success or profitability of the
ownership, use or operation of the SPS Business by Purchaser after the Closing;
or (vi) any other information, written or oral and in any form provided, or
documents previously made available or which are made available after the date
hereof to it or any of its agents, advisors, employees or representatives with
respect to the Company or its Subsidiaries, the SPS Business or their respective
operations or other related matters, whether in expectation of the transactions
contemplated by this Agreement or otherwise. Nothing in this Section 4.6 shall
be deemed to limit Purchaser's rights as set forth in this Agreement with
respect to the representations, warranties and covenants set forth in this
Agreement.
4.7 INVESTMENT INTENT. Purchaser has such knowledge and experience
in financial and business matters that it is capable of evaluating the risks and
merits associated with the acquisition of the Shares and is acquiring the Shares
for its own account for investment, with no present intention of making a public
distribution thereof.
29
Purchaser will not sell or otherwise dispose of the Shares in violation of the
Securities Act of 1933, as amended, or any state securities laws.
4.8 FINDER'S FEE. Purchaser has not done anything to cause any of
Honeywell, the Company, its Subsidiaries or their respective stockholders,
option holders, directors, officers or Affiliates to incur any liability to any
party for any brokerage or finder's fee or agent's commission, or the like, in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Purchaser.
4.9 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Honeywell
acknowledges and agrees that, except as set forth in this Agreement, Purchaser
makes no representation or warranty, express or implied, at law or in equity,
with respect to Purchaser, its Subsidiaries, its businesses or financial
condition or any of its assets, liabilities or operations, and any such other
representations or warranties are hereby expressly disclaimed.
ARTICLE V
COVENANTS
5.1 INTERIM OPERATIONS OF THE COMPANY. From and after the date
hereof until the Closing Date (or earlier termination of this Agreement),
Honeywell shall cause the Company and its Subsidiaries to conduct their
respective businesses in the ordinary course consistent with past practice and
in compliance in all material respects with all applicable Laws and use their
commercially reasonable efforts to preserve intact the assets of, and the
business organizations and relationships with employees and third parties having
material business dealings with, the Company and its Subsidiaries. Without
limiting the generality of the foregoing, except (1) as otherwise expressly
required by this Agreement (including the actions contemplated by Section
10.10(a) and Section 10.11), (2) for actions approved in advance by Purchaser in
writing (which approval shall not be unreasonably withheld or delayed), or (3)
as set forth on Section 5.1 of the Disclosure Schedule, from and after the date
hereof until the Closing Date (or earlier termination of this Agreement),
Honeywell shall cause the Company and its Subsidiaries not to take any of the
following actions:
(a) adopt any change in their respective certificates of
incorporation or bylaws or other similar organization or governing documents;
(b) adopt a plan or agreement of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its Subsidiaries;
(c) (i) issue, sell, transfer, pledge, dispose of or
encumber the Shares or any shares of capital stock of the Subsidiaries of the
Company, (ii) split, combine, subdivide or reclassify the Shares or any shares
of capital stock of the Subsidiaries of the Company, (iii) declare, set aside or
pay any dividend or other distribution, other than dividends or other
distributions payable in cash on or prior to the
30
Closing, with respect to the Shares or any shares of capital stock of the
Subsidiaries of the Company or (iv) redeem, purchase or otherwise acquire
directly or indirectly the Shares or any shares of capital stock of the
Subsidiaries of the Company;
(d) except as required by applicable Law, (i) adopt,
establish or enter into an agreement to adopt or establish any plan, policy,
agreement or arrangement that would be a Plan if established or adopted on or
prior to the date hereof, (ii) increase the benefits under any Plans or modify
any Plan where such modification has a cost impact on the Company or its
Subsidiaries or (iii) increase the salary or bonus payable to any employee of
the Company or its Subsidiaries other than in the ordinary course of business
consistent with past practice; PROVIDED, HOWEVER, that nothing in this Agreement
shall prevent the Company or its Subsidiaries from entering into employment
agreements with new employees or severance agreements (other than officers or
directors or other key employees) in the ordinary course of business consistent
with past practice; PROVIDED, FURTHER, that no such agreements with new
employees or severance agreement shall provide for benefits upon or following a
"change of control"; and PROVIDED, FURTHER, that the cost impact of all actions
permitted pursuant to this clause (d) shall not exceed $250,000 in the
aggregate, excluding any actions required by applicable Law;
(e) enter into or consummate any transaction involving
the acquisition of the business, stock, or material assets or other properties
of any other Person (other than acquisitions of inventory or other business
assets in the ordinary course of business consistent with past practice);
(f) sell, lease, license or otherwise dispose of any
material amount of assets, tangible or intangible, or property, except pursuant
to existing Material Contracts and except for sales of inventory or other
business assets in the ordinary course of business consistent with past
practice;
(g) other than in the ordinary course of business
consistent with past practice or as otherwise required by the Code or applicable
Laws, (i) make or rescind any material Tax election with respect to the Company
or its Subsidiaries or file any amended Tax Returns, (ii) change any of its
material methods of reporting income or deductions for Tax purposes, (iii)
compromise any Tax liability of the Company or any of its Subsidiaries that is
material to the Company and its Subsidiaries or (iv) issue a waiver to extend
the period of limitations for the payment or assessment of any Tax;
(h) (i) other than in the ordinary course of business
consistent with past practice, incur any Indebtedness, (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person, except for
assumptions, guarantees or endorsements of the ordinary course obligations of
any Subsidiary of the Company, (iii) make any loans, advances or capital
contributions to or investments in any other Person (other than to Subsidiaries
of the Company or customary loans or advances to employees, in each case in the
ordinary course of business consistent with past practice) or (iv) mortgage or
pledge any of its material assets, tangible or intangible, or create or suffer
to exist any Encumbrance thereupon (other than Permitted Encumbrances);
31
(i) except as may be required as a result of a change in
Law or in GAAP, change any of the accounting principles or practices (including
the Specified Accounting Policies and any procedures with respect to the payment
of accounts payable and collection of accounts receivable) used by the Company
and its Subsidiaries;
(j) manage working capital other than in the ordinary
course of business consistent with past practice, including not extending the
payment of accounts payable, accelerating the collection accounts receivable or
failing to maintain and manage inventory levels, in each case, other than in the
ordinary course of business consistent with past practice;
(k) enter into, terminate, modify or amend or waive any
pricing provision or other material provisions of, any Material Contract;
(l) change the material terms and conditions of their
business relationships with Key Customers or Key Suppliers;
(m) temporarily or permanently (i) terminate or close any
facility or (ii) disrupt production or call center functioning;
(n) write up or down of any of the assets of the Company
or its Subsidiaries individually or in the aggregate in excess of $2,500,000
other than as may be required by GAAP or applicable Laws;
(o) settle, discharge or compromise any material action,
claim, action, suit, investigation or proceeding or enter into any material
consent decree, injunction or similar restraint or form of equitable relief in
settlement thereof;
(p) incur or commit to any capital expenditures other
than capital expenditures incurred or committed to in the ordinary course of
business consistent in all material respects with the 2005 capital expenditure
budget attached as Section 5.1(p) of the Disclosure Schedule or enter into any
new line of business;
(q) make any material purchase commitment not in the
ordinary course of business consistent with past practice; or
(r) authorize, or agree or commit to do, whether in
writing or otherwise, any of the foregoing.
5.2 FILINGS WITH GOVERNMENTAL AUTHORITIES.
(a) Honeywell and Purchaser shall as promptly as
practicable, but in no event later than ten (10) business days after the date
hereof, cause to be filed with the FTC and the DOJ the notification and report
form pursuant to the HSR Act required for the transactions contemplated hereby.
Honeywell and Purchaser shall, as promptly as practicable, comply with any
request for additional information and documents pursuant to the HSR Act.
Honeywell and Purchaser shall inform the other promptly of any communication
made by or on behalf of such party to (including
32
permitting the other party to review such communication in advance), or received
from, the FTC or the DOJ and shall furnish to the other such information and
assistance as the other may reasonably request in connection with its
preparation of any filing, submission or other act that is necessary or
advisable under the HSR Act. Honeywell and Purchaser shall keep each other
timely apprised of the status of any communications with, and any inquiries or
requests for additional information from, the FTC or the DOJ, and shall comply
promptly with any such inquiry or request. Neither party shall agree to
participate in any meeting with any Governmental Authority in respect of any
such filings, investigation or other inquiries unless it consults with the other
party in advance, and to the extent permitted by such Governmental Authority,
gives the other party the opportunity to attend and participate thereat.
(b) Purchaser shall as promptly as reasonably practicable
use its best efforts to avoid or eliminate each and every impediment under any
antitrust or competition Law that may be asserted by any U.S. federal, state,
local or foreign antitrust or competition Governmental Authority so as to enable
the parties to expeditiously close the transactions contemplated by this
Agreement, including committing to or effecting, by consent decree, hold
separate orders, or otherwise, the sale, divestiture or disposition of such of
its assets or businesses, or of the business to be acquired by it pursuant to
this Agreement, as is required to be divested in order to avoid the entry of, or
to effect the dissolution of, any decree, order, judgment, injunction, temporary
restraining order or other order in any suit or proceeding, that would otherwise
have the effect of delaying or preventing the consummation of the transactions
contemplated by this Agreement. In addition, without limiting the generality of
the foregoing regarding Governmental Authorities, Purchaser agrees to take
promptly any and all steps necessary to attempt to vacate or lift any order or
other restraint relating to antitrust matters that would have the effect of
making the transaction contemplated by this Agreement illegal or otherwise
prohibiting its consummation. Honeywell shall, and shall cause the Company and
its Subsidiaries to, reasonably cooperate with Purchaser in connection with
Purchaser's obligations pursuant to this Section 5.2(b).
(c) The parties hereto shall cooperate with one another
in determining whether any action by or in respect of, or filing with, any
Governmental Authority (excluding the actions and filings described in Section
5.2(a)) is required or reasonably appropriate, or any action, consent, approval
or waiver from any party to any material Contract is required or reasonably
appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement and the Confidentiality Agreement, in taking such actions or making
any such filings, the parties hereto shall furnish information required in
connection therewith and timely seek to obtain any such actions, consents,
approvals or waivers.
5.3 CONSENTS. Except as contemplated in Section 5.2, Purchaser, on
the one hand, and Honeywell, on the other hand, shall each use its reasonable
best efforts to obtain all consents (including all consents identified in good
faith by any of the parties as required under any Contract) and authorizations
required in connection with the consummation of the transactions contemplated by
this Agreement, including obtaining
33
the consents and authorizations and making the filings referred to in Sections
3.3 and 4.3; PROVIDED, HOWEVER, that neither Purchaser, on the one hand, nor
Honeywell, on the other hand, will be obligated to make any material payment to
any Person from whom consent or authorization is requested.
5.4 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) Purchaser acknowledges that the information being
Made Available to it by Honeywell or its Subsidiaries (or their respective
agents or representatives) is subject to the terms of a confidentiality
agreement, dated June 2, 2005, between MacAndrews & Forbes Holdings, Inc. and
Honeywell (the "CONFIDENTIALITY AGREEMENT"), the terms of which are incorporated
herein by reference, and Purchaser hereby agrees to be bound by all of the
obligations of MacAndrews & Forbes Holdings, Inc. under the Confidentiality
Agreement as if Purchaser were an original party to the Confidentiality
Agreement. Effective upon, and only upon, the Closing, the Confidentiality
Agreement will terminate; PROVIDED, HOWEVER, that Purchaser hereby acknowledges
its confidentiality obligations in the Confidentiality Agreement will terminate
only with respect to information relating to the businesses of the Company and
its Subsidiaries; PROVIDED, FURTHER, that Purchaser acknowledges that any and
all other information provided or Made Available to it by Honeywell or its
Subsidiaries (or their respective agents or representatives) concerning
Honeywell or their its Subsidiaries will remain subject to the terms and
conditions of the Confidentiality Agreement after the Closing.
(b) Honeywell shall, subject to compliance with
applicable Laws, provide Purchaser access and the opportunity to make such
investigation of the management, employees, properties, businesses and
operations of the Company and its Subsidiaries, and such examination of the
books, records and financial condition of the Company and its Subsidiaries, as
it reasonably requests (excluding any subsurface or other intrusive
investigation of real or personal property). Any confidential information
provided pursuant to this Section 5.4(b) shall, subject to Section 5.4(a), be
kept confidential by Purchaser and will be subject to applicable Law and the
terms of the Confidentiality Agreement. Any such investigation and examination
will be conducted under reasonable circumstances after appropriate advance
notice and in a manner so as not to unreasonably interfere with the conduct of
the SPS Business. No investigation pursuant to this Section 5.4 shall affect any
representation or warranty by Honeywell in this Agreement or any condition to
the obligations (or indemnification or other rights) of Purchaser hereunder.
5.5 PUBLICITY. Honeywell shall not, and shall not permit the
Company or its Subsidiaries to, and Purchaser shall not, issue any press release
or public announcement concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
parties hereto, which approval will not be unreasonably withheld or delayed,
unless, in the reasonable judgment of Honeywell or Purchaser, disclosure is
otherwise required by applicable Law or by the applicable rules of any stock
exchange on which Honeywell or Purchaser lists its securities; PROVIDED that, to
the extent required by applicable Law or by the rules of any
34
stock exchange, the party intending to make such release or announcement shall
use its reasonable best efforts consistent with such applicable Law to consult
with the other party with respect to the text thereof.
5.6 BOOKS AND RECORDS.
(a) Honeywell shall use reasonable best efforts to
deliver or cause to be delivered to Purchaser at Closing all properties, books,
records, Contracts, information and documents relating to the SPS Business that
are not then in the possession or control of the Company or its Subsidiaries. As
soon as is reasonably practicable after the Closing, Honeywell will deliver or
cause to be delivered to Purchaser any remaining properties, books, records,
Contracts, information and documents relating to the businesses of the Company
and its Subsidiaries that are not already in the possession or control of the
Company or its Subsidiaries. Subject to Section 5.15 of this Agreement,
Honeywell shall be permitted to retain one (1) copy of materials that have been
Made Available to Purchaser solely for archival record-keeping purposes.
(b) Subject to Section 7.2(a) (relating to the
preservation of Tax records), Honeywell and Purchaser agree that each of them
will preserve and keep the records held by it relating to the businesses of the
Company and its Subsidiaries for a period of ten (10) years from the Closing
Date in accordance with their respective corporate records retention policies;
PROVIDED, HOWEVER, that prior to disposing of any such records in accordance
with such policies, the applicable party shall provide written notice to the
other party of its intent to dispose of such records and shall provide such
other party the opportunity to take ownership and possession of such records (at
such other party's sole expense) to the extent they relate to such other party's
business or obligations within 30 days after such notice is delivered. If such
other party does not confirm its intention in writing to take ownership and
possession of such records within such 30-day period, the party who possesses
the records may proceed with the disposition of such records. Honeywell and
Purchaser shall make such records available to the other as may be reasonably
required by such party in connection with, among other things, any insurance
claims by, legal proceedings against, or governmental investigations of
Honeywell or Purchaser or any of their respective Affiliates or in order to
enable Honeywell or Purchaser to comply with their respective obligations under
this Agreement and each other agreement, document or instrument contemplated
hereby or thereby or to the extent necessary in connection with their respective
financial reporting or tax reporting obligations relating to any period ending
on or before the Closing Date.
5.7 FURTHER ACTION. Honeywell and Purchaser shall use their
respective reasonable best efforts to (i) take, or cause to be taken, all
actions (within their respective control) necessary or appropriate to consummate
the transactions contemplated by this Agreement, and (ii) cause the fulfillment
at the earliest practicable date of all of the conditions to their respective
obligations to consummate the transactions contemplated by this Agreement.
5.8 EXPENSES. Whether or not the transactions contemplated hereby
are consummated, all costs and expenses incurred in connection with this
Agreement and
35
the transactions contemplated hereby shall be paid by the party hereto incurring
such expenses except as expressly provided herein (it being understood that,
except for immaterial expenses that are fully reflected as current liabilities
in Final Net Working Capital, all such out-of-pocket costs and expenses of the
Company or any of its Subsidiaries, other than those incurred in connection with
Purchaser's financing hereunder, shall be paid by Honeywell at or prior to
Closing). Notwithstanding the foregoing, Purchaser and Honeywell shall each pay
one-half of any fees required to be paid under the HSR Act.
5.9 NOTIFICATION OF CERTAIN MATTERS.
(a) Each party shall give prompt notice to the other of
the following:
(i) the occurrence or nonoccurrence of any event
whose occurrence or nonoccurrence could reasonably be expected to cause
any of the conditions precedent set forth in Article VI not to be
satisfied; and
(ii) the status of matters relating to completion
of the transactions contemplated hereby, including promptly furnishing
the other with copies of notices or other communications received by
any party or any of its Affiliates from any Governmental Authority or
other third party with respect to this Agreement or the transactions
contemplated hereby.
(b) Honeywell shall use its reasonable best efforts to
keep Purchaser promptly informed of any material development related to any
Partner Contract or Direct Contract.
(c) No notification pursuant to this Section 5.9 shall
affect any representation or warranty by Honeywell in this Agreement or any
condition to the obligations (or indemnification or other rights) of Purchaser
hereunder.
5.10 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) The employees of the Company and its Subsidiaries as
of the Closing (the "AFFECTED EMPLOYEES") shall remain employees of the Company
and its Subsidiaries immediately following the Closing; PROVIDED, that nothing
in this Agreement shall limit or affect Purchaser's right to terminate the
employment of any such Affected Employee at any time following the Closing.
Honeywell and its Affiliates shall also agree to allow for the transfer of any
of the employees listed on Schedule 5.10(a) of the Disclosure Schedule to the
Company and its Subsidiaries, on or prior to the Closing, at Purchaser's option,
subject to the continued recognition of any related severance obligations and
consent of any such employee. Purchaser acknowledges and agrees that Company and
its Subsidiaries shall be solely responsible for all Liabilities arising out of
or related to any Plan (including Liabilities attributable to periods prior to
Closing). The foregoing, however, shall not limit Purchaser's rights under
Article IX for breaches of representations, warranties, covenants and
agreements.
36
(b) For a period of not less than twelve (12) months
following the Effective Time, Purchaser shall provide, or shall cause its
Affiliates or the Company and its Subsidiaries, as applicable, to provide,
compensation and health and welfare and defined contribution plan benefits that
are substantially comparable in the aggregate to the compensation and health and
welfare and defined contribution plan benefits provided to the Affected
Employees immediately prior to the Closing. Purchaser or its Affiliates shall
comply (or shall cause the Company and its Subsidiaries to comply) with the
terms of all Plans in effect immediately prior to the Effective Time, subject to
any reserved right to amend or terminate any Plan; PROVIDED, HOWEVER, that no
such amendment or termination may be inconsistent with Purchaser's obligations
pursuant to this Section 5.10.
(c) Affected Employees shall be given credit for all
service with the Company and its Subsidiaries (or service credited by the
Company or its Subsidiaries, if greater) under all employee benefit plans and
arrangements currently maintained or established in the future by Purchaser, its
Affiliates, the Company or any of its Subsidiaries in which they are or become
participants for purposes of participation, eligibility, vesting, and level of
benefits (but not for benefit accruals under any defined benefit pension plan or
any plan providing post-retirement medical, dental or prescription drug benefits
or as would otherwise result in duplication of benefits). Purchaser, its
Affiliates, the Company and its Subsidiaries shall cause any pre-existing
conditions or limitations, eligibility waiting periods or required physical
examinations under any welfare benefit plans of Purchaser, its Affiliates, the
Company and its Subsidiaries to be waived with respect to Affected Employees and
their eligible dependents to the extent waived under the corresponding Company
Employee Benefit Plan in which the applicable Affected Employee participated
prior to the Effective Time (to the extent permitted by the applicable welfare
plans and as required by applicable Law).
(d) No later than five (5) business days prior to the
Closing Date, Honeywell shall provide Purchaser with a list setting forth the
number of employees terminated or to be terminated from each site of employment
of the Company and of each of its Subsidiaries during the 90-day period ending
on the Closing Date for reasons qualifying the termination as "employment
losses" under the WARN Act and the date of each such termination with respect to
each termination; provided, that this sentence shall not apply with respect to
any site of employment at which sufficient employees have not been employed at
any time in such 90-day period for terminations of employment at such site to be
subject to the WARN Act.
5.11 INDEBTEDNESS; INTERCOMPANY ACCOUNTS.
(a) No later than the Closing Date, (x) Honeywell shall
discharge (or otherwise cause to be extinguished), or shall cause its applicable
Subsidiaries to discharge (or otherwise cause to be extinguished) any and all
Indebtedness of the Company and its Subsidiaries (other than (i) Indebtedness
owing from one member of the SPI Group to another member of the SPI Group
(unless Purchaser shall have given written notice to Honeywell on or prior to
the earlier of (i) December 1, 2005 or (ii) ten (10) business days prior to the
Closing that any such Indebtedness be discharged or
37
extinguished), (ii) any letters of credit and (iii) any surety bonds) and (y)
Honeywell shall, or shall cause its applicable Subsidiaries, to terminate or
cancel or otherwise extinguish any and all intercompany accounts and Contracts
(provided that items 3, 4 and 9 set forth in Section 3.13(a)(vii) of the
Disclosure Schedule shall not be so terminated and extinguished but shall be
addressed as provided in Section 5.11(d) and Section 5.12 of this Agreement, to
the extent applicable) and other intercompany Indebtedness between any of
Honeywell or its Subsidiaries (other than the SPI Group), on the one hand, and
the SPI Group, on the other hand. For the avoidance of doubt, and without
limiting Honeywell's obligations to indemnify for Excluded Liabilities, the
obligations to discharge or extinguish Indebtedness pursuant to this Section
5.11(a) shall not apply to the items listed in Section 3.13(a)(iv)(A), (B) or
(C) of the Disclosure Schedule but shall apply to all of the items listed in
Section 3.13(a)(iv)(D) of the Disclosure Schedule; PROVIDED, HOWEVER, that,
notwithstanding the foregoing but subject to the following sentence, the
Indebtedness set forth in item 1 of Section 3.13(a)(iv)(D) of the Disclosure
Schedule shall not be discharged or extinguished if (x) Honeywell shall not have
elected to effect the Restructuring Transactions pursuant to Section 10.11 and
(y) Purchaser shall have given written notice to Honeywell on or prior to the
earlier of (i) December 1, 2005 or (ii) ten (10) business days prior to the
Closing that such Indebtedness shall remain outstanding. In the event Honeywell
elects to effect the Restructuring Transactions and Purchaser gives written
notice to Honeywell on or prior to the earlier of (i) December 1, 2005 or (ii)
ten (10) business days prior to the Closing that such Indebtedness shall remain
outstanding as an obligation of the Company or any of its Subsidiaries (as of
the Closing giving effect to the Restructuring Transactions), Honeywell shall
cause the receivable in respect of such Indebtedness to be contributed to
Security Printing, Inc. or assigned to Novar USA Inc., provided that such
contribution or assignment will not have any adverse consequences to Honeywell.
Notwithstanding anything to contrary contained in this Agreement, if Honeywell
elects to effect, and effects, the Restructuring Transactions pursuant to
Section 10.11, Honeywell shall not be obligated to discharge or extinguish (or
cause to be discharged or extinguished) any Indebtedness of Novar Finance, Inc.,
Novar Holdco, Inc. or Novar Investments (USA) Inc. owed to any Person (other
than the Company or its Subsidiaries as of Closing Date after giving effect to
the Restructuring Transactions).
(b) To the extent that any obligations of the Company or
its Subsidiaries (determined as of the Closing Date after giving effect to the
Restructuring Transactions, if applicable) are secured by a letter of credit or
guarantee by Honeywell or any of its Subsidiaries (other than any of the Company
or its Subsidiaries determined as of the Closing Date after giving effect to the
Restructuring Transactions, if applicable) (all of which are set forth in
Section 5.11(b) of the Disclosure Schedule and, if Honeywell elects to effect,
and effects, the Restructuring Transactions pursuant to Section 10.11, item 6 of
Section 3.13(a)(iv)(C) of the Disclosure Schedule but only to the extent that it
relates to the SPS Business), and such letters of credit or guarantees cannot be
discharged or extinguished prior to or at the Closing Date, Purchaser and
Honeywell shall use their commercially reasonable efforts to (i) cause Purchaser
or one of its Affiliates to be substituted for Honeywell or a Subsidiary of
Honeywell (other than the Company or its Subsidiaries), as applicable, with
respect to (and cause Honeywell or
38
such Subsidiary of Honeywell to be released from) such guarantees (or, if
feasible on commercially reasonable terms, to cause such guarantees to be
extinguished) prior to the Closing Date, and (ii) cause to be issued letters of
credit as replacement letters of credit for, or back-to-back letters of credit
supporting (for so long as the original letters of credit are in effect) such
letters of credit (but, in each case, solely to the extent allocated to the SPS
Business as set forth in Section 3.13(a)(iv)(C) of the Disclosure Schedule)
prior to the Closing Date. To the extent such guarantees cannot be extinguished
or substituted for, or such letters of credit cannot be replaced or supported by
back-to-back letters of credit, at or prior to the Closing, Purchaser shall use
its commercially reasonable efforts to do so as promptly as practicable
following the Closing. In any event, Purchaser shall indemnify and hold
Honeywell and its Subsidiaries (other than the Company and its Subsidiaries)
harmless from and against (A) any and all Losses resulting from any payment
following the Closing Date by any of Honeywell or its Subsidiaries (other than
the Company and its Subsidiaries) under the guarantees or letters of credit set
forth in Section 5.11(b) of the Disclosure Schedule or, if Honeywell elects to
effect, and effects, the Restructuring Transactions pursuant to Section 10.11,
item 6 of Section 3.13(a)(iv)(C) of the Disclosure Schedule (as well as any
immaterial letters of credit or guarantees that Honeywell inadvertently excluded
from Section 5.11(b) of the Disclosure Schedule) and (B) in the case of such
letters of credit set forth in Section 5.11(b) of the Disclosure Schedule, any
bank fees incurred by any of Honeywell or any of its Subsidiaries (other than
the Company and its Subsidiaries) following the Closing Date to maintain such
letters of credit, in any such case, only to the extent that such Losses,
Liabilities or fees are (i) allocable to the SPS Business as set forth in
Section 3.13(a)(iv)(C) of the Disclosure Schedule and (ii) (x) relate to periods
following the Closing or (y) are fully reflected as current liabilities in Final
Net Working Capital. The foregoing sentence shall not apply to any Excluded
Liability for which Honeywell has agreed to indemnify Purchaser pursuant to
Article IX.
(c) (i) With respect to the guarantees listed under items
6 and 7 of Section 3.13(a)(iv)(B) of the Disclosure Schedule (the "TERMINABLE
GUARANTEES"), Honeywell shall cause Novar Holdco Inc., promptly but no later
than ten (10) days after the date of this Agreement, to deliver termination
notices to the beneficiaries of the Terminable Guarantees in accordance with the
terms of such Terminable Guarantees and provide Purchaser with copies of such
notices; (ii) with respect to all guarantees listed in Section 3.13(a)(iv)(B) of
the Disclosure Schedule other than the Terminable Guarantees (the "OTHER
GUARANTEES" and, together with the Terminable Guarantees, the "NOVAR
GUARANTEES"), Honeywell shall use its commercially reasonable efforts (including
using commercially reasonable efforts to assume any liabilities under such Other
Guarantees) to cause the Other Guarantees to be terminated or assumed by
Honeywell as a substitute guarantor or, if acceptable to the other party to, or
beneficiary of, such Other Guarantee, any other Person (other than the Company
or any of its Subsidiaries) pursuant to documentation reasonably satisfactory to
Purchaser prior to the earlier to occur of (A) the Closing and (B) the closing
of the sale of the "Indalex Aluminum Solutions" business to Indalex Holding
Corp. or another third party; provided, however, that Honeywell shall be
relieved of its obligations under this Section 5.11(c)(ii) with respect to any
Other Guarantees if and at such time as Novar Holdco Inc. (or the Company or any
of its
39
Subsidiaries, as the case may be) shall have been released and discharged from
any liability thereunder pursuant to documentation reasonably acceptable to
Purchaser (whether or not in connection with any substitution thereunder); and
(iii) with respect to all Novar Guarantees, Honeywell shall use its commercially
reasonable efforts (including using commercially reasonable efforts to assume
any liabilities under such Novar Guarantees) to cause Novar Holdco Inc. (or the
Company or any of its Subsidiaries, as the case may be) from and after the
Closing to be released and discharged from any Liability (whether arising prior
to or following the Closing) under the Novar Guarantees pursuant to
documentation reasonably satisfactory to Purchaser. From and after the date
hereof, Honeywell shall not, and shall cause its applicable Subsidiaries not to,
(x) extend or amend (to the extent such amendment increases in any material
respect the exposure of Novar Holdco Inc. (or the Company or any of its
Subsidiaries, as the case may be)) the applicable Contracts underlying the Novar
Guarantees or (y) incur any new Liabilities under such Contracts (other than
Liabilities incurred prior to the Closing in the ordinary course), in each case,
without the applicable Novar Guarantee being terminated or a Person (other than
the Company or any of its Subsidiaries) being substituted for Novar Holdco Inc.
(or the Company or any of its Subsidiaries, as the case may be) thereunder.
Notwithstanding any of the foregoing to the contrary, Honeywell shall indemnify
the Purchaser Indemnified Parties for all liabilities in respect of the Novar
Guarantees pursuant to Article IX. Notwithstanding the foregoing, Honeywell
shall not have any obligations under this Section 5.11(c) from and after such
time as it elects to effect, and thereafter effects, the Restructuring
Transactions pursuant to Section 10.11.
(d) With respect to the arrangement set forth under item
9 of Section 3.13(a)(vii) of the Disclosure Schedule, in the event such
arrangement with respect to surety bonds associated with the SPS Business cannot
be discharged or extinguished prior to or at the Closing, Purchaser shall use
its commercially reasonable efforts (including using commercially reasonable
efforts to assume any liabilities under such arrangement as it relates to the
SPS Business) to either (i) cause Purchaser or one of its Subsidiaries to be
substituted for Honeywell with respect to (and cause Honeywell to be released
from) such arrangement as it relates to the SPS Business or (ii) cancel all such
bonds such that Honeywell will have no liability with respect thereto under such
arrangement as it relates to the SPS Business, in either case, prior to the
Closing. To the extent such arrangement cannot be extinguished or substituted
for, at or prior to the Closing, Purchaser shall use its commercially reasonable
efforts to do so as promptly as practicable following the Closing. In any event,
Purchaser shall indemnify and hold Honeywell and its Subsidiaries (other than
the Company and its Subsidiaries) harmless from and against (A) any and all
Losses resulting from any payment following the Closing Date by any of Honeywell
or its Subsidiaries (other than the Company and its Subsidiaries) under such
arrangement as it relates to the SPS Business and (B) any fees incurred by any
of Honeywell or any of its Subsidiaries (other than the Company and its
Subsidiaries) following the Closing Date to maintain such arrangement as it
relates to the SPS Business.
5.12 INSURANCE MATTERS.
40
(a) Except as set forth in Section 5.12(b), Honeywell
shall use its commercially reasonable efforts to keep, or cause to be kept, all
insurance policies presently maintained that are material to the conduct of the
businesses of the Company and its Subsidiaries and their properties, or
replacements therefor, in full force and effect through the Closing. Except with
respect to the Occurrence Policies, as defined in Section 5.12(b), coverage for
the Company and its Subsidiaries shall terminate as of the Closing Date under
policies not directly held by the Company or any of its Subsidiaries.
(b) Prior to the Closing Honeywell shall use commercially
reasonable efforts to cause any carriers who have underwritten any global,
primary casualty and excess liability insurance policies which provides
insurance coverage to the Company and its Subsidiaries on an "occurrence" basis
(the "OCCURRENCE POLICIES") to continue to make coverage available to the
Company and its Subsidiaries following the Closing Date for claims arising out
of occurrences prior to the Closing Date. Honeywell acknowledges (without making
any representation with respect to such Occurrence Policies, except as set forth
in Section 3.18) the right of Purchaser for access to the benefit of insurance
for such pre-Closing occurrences under the historic Occurrence Policies which
have provided coverage to the Company and its Subsidiaries. Following the
Closing Date, each of the parties shall reasonably cooperate with and assist the
other party, at such other party's expense, in issuing notice of claims under
the Occurrence Policies, presenting such claims for payment and collecting
insurance proceeds related thereto; PROVIDED, HOWEVER, that any right that
Purchaser shall have under the policies shall be limited to the terms and
conditions set forth therein. Purchaser shall promptly reimburse Honeywell and
its Affiliates (other than the Company and its Subsidiaries) for any
out-of-pocket costs and expenses incurred by any of Honeywell or such Affiliates
in connection with Honeywell's obligations under this Section 5.12(b) (including
any out-of-pocket costs and expenses incurred in connection with maintaining or
replenishing any loss fund or similar arrangement required under the Occurrence
Policies) (it being understood that Purchaser shall use its commercially
reasonable efforts to cause Purchaser or one of its Subsidiaries to be
substituted for Novar Inc. with respect to the portion of any loss fund or
similar arrangement associated with the SPS Business (and cause Novar Inc. to be
released with respect to such portion)).
(c) On or prior to the Closing Date, Honeywell shall use
commercially reasonable efforts to cause the underwriters and insurers of any
fiduciary liability policies and directors & officers liability insurance
policies which provide insurance coverage to any officer, director or employee
of the Company and any of its Subsidiaries (collectively, the "D&O POLICIES") to
provide quotations for extended coverage to individuals who will be officers,
directors or employees of the Company or any of its Subsidiaries following the
Closing for a period of up to six (6) years on a "trailing" or "run-off" basis
on terms no less favorable (as determined by the parties acting reasonably) to
such D&O Policies maintained in effect by Honeywell or its Affiliates on the
date hereof (the "RUN-OFF COVERAGE"). Before entering into any agreement with
respect to Run-Off Coverage, Honeywell shall obtain Purchaser's consent to
purchase such Run-Off Coverage. Any such purchase shall be at Purchaser's sole
cost and expense. Amounts paid pursuant to this Section 5.12 shall be
disregarded for
41
purposes of preparing the Preliminary Working Capital Statement or calculating
the Final Working Capital Statement pursuant to Section 2.3.
5.13 NON-SOLICITATION OF EMPLOYEES. From and after the date hereof
and through the second anniversary of the Closing Date, Honeywell shall not (and
shall cause each of its Affiliates not to), without the prior written consent of
Purchaser, directly or indirectly, solicit or hire any employee of the Company
or its Subsidiaries (other than clerical or non-salaried employees); provided,
HOWEVER, the foregoing shall not prohibit Honeywell from (a) engaging in the
general solicitation (whether by newspaper, trade publication or other
periodical) of employees (or hiring any employees that respond to such general
solicitation) so long as such solicitation is not directed at employees of the
Company or its Subsidiaries or at employees in the industries in which the SPS
Business operates as of the date hereof or the Closing Date, or (b) soliciting
or hiring any such employee (other than clerical or non-salaried employees) who
is no longer employed by the Company or its Subsidiaries and has not been an
employee of the Company or its Subsidiaries for at least six (6) months prior to
such solicitation or employment by Honeywell or its Affiliates.
5.14 NON-COMPETITION.
(a) For a period of two (2) years from the Closing Date,
Honeywell agrees that it will not, and will cause its Subsidiaries not to,
directly or indirectly, whether as principal, agent, partner, officer, director,
stockholder, employee, consultant or otherwise, alone or in association with any
other Person, own, manage, operate, control, participate in, acquire more than
five percent (5%) of (or the right to acquire more than five percent (5%) of)
any class of voting securities of, perform services for, or otherwise carry on,
a business which is in competition with the SPS Business (a "COMPETING
BUSINESS"). The restrictions set forth in this Section 5.14(a) shall not be
construed to prohibit or restrict Honeywell or any of its controlled Affiliates
from acquiring any Person or business that engages in any Competing Business
provided that (i) such activities do not constitute the principal activities of
the Person or business to be acquired (based on the sales of such business
during the preceding four (4) full calendar quarters) and (ii) if the Competing
Business constitutes in excess of five percent (5%) of the revenues of the
Person or business acquired, Honeywell will divest that portion of such Person
or business that engages in the Competing Business within nine (9) months after
such acquisition.
(b) Notwithstanding anything to the contrary in this
Agreement, the prohibitions in Section 5.14(a) shall not apply to (i) any
businesses or operations of Honeywell or any of its Subsidiaries which are
transferred to any third party (other than to a Subsidiary of Honeywell) after
the date hereof, or (ii) to any Subsidiaries of Honeywell the stock of which is
transferred to any third party (other than to a Subsidiary of Honeywell) after
the date hereof.
(c) Honeywell acknowledges and agrees that the remedy at
Law for any breach, or threatened breach, of any of the provisions of this
Section 5.14 will be inadequate and, accordingly, Honeywell covenants and agrees
that Purchaser shall, in
42
addition to any other rights and remedies which Purchaser may have at Law, be
entitled to equitable relief, including injunctive relief, and to the remedy of
specific performance with respect to any breach or threatened breach of such
covenant, as may be available from any court of competent jurisdiction. In
addition, Honeywell and Purchaser agree that the terms of the covenant in this
Section 5.14 are fair and reasonable in light of Purchaser's plans for the SPS
Business and are necessary to accomplish the full transfer of the goodwill and
other intangible assets contemplated hereby. In the event that any of the
covenants contained in this Section 5.14 shall be determined by any court of
competent jurisdiction to be unenforceable for any reason whatsoever, then any
such provision or provisions shall not be deemed void, and the parties hereto
agree that said limits may be modified by the court and that said covenant
contained in this Section 5.14 shall be amended in accordance with said
modification, it being specifically agreed by the parties that it is their
continuing desire that this covenant be enforced to the full extent of its terms
and conditions or if a court finds the scope of the covenant unenforceable, the
court should redefine the covenant so as to comply with applicable Law.
5.15 SPS CONFIDENTIAL INFORMATION.
(a) Honeywell acknowledges and agrees that the books,
records, data and other documents and confidential information concerning the
SPS Business and/or the products, services, customer development information
(including customer and prospect lists), sales activities and procedures,
promotional and marketing techniques, pricing, plans and strategies, financing,
development and expansion plans and credit and financial data concerning
customers and suppliers and other information of or to the extent relating to
the SPS Business, the Company or any of its Subsidiaries are considered by
Purchaser to be confidential and in the nature of trade secrets, and are
valuable, special and unique assets of the SPS Business, access to and knowledge
of which are essential to preserve the goodwill, customer relationships and
ongoing business relationships of the SPS Business for the benefit of Purchaser.
Honeywell further agrees that all knowledge and information described in the
preceding sentence that is not in the public domain (unless such knowledge and
information is in the public domain as a result of a breach of this or any other
confidentiality agreement by Honeywell or any of its Affiliates) shall be
considered confidential information (collectively, the "SPS CONFIDENTIAL
INFORMATION"). For the avoidance of doubt, the term "SPS Confidential
Information" shall not include information that (i) does not relate to the SPS
Business, (ii) becomes available to Honeywell or any of its Affiliates on a
non-confidential basis from a source other the Company or any Subsidiary of the
Company, PROVIDED that to Honeywell's or any of its Affiliates' knowledge such
source is not bound by a confidentiality agreement with or similar obligation to
Purchaser, the Company or their Affiliates with respect to such information,
(iii) is independently developed by Honeywell or any of its Affiliates under
circumstances not involving a breach of this Section 5.15, or (iv) is publicly
disclosed pursuant to a lawful requirement or request from a Governmental
Authority acting within its jurisdiction, or non-confidential disclosure is
otherwise required by Law. As used in this Section 5.15, "knowledge" shall mean
the knowledge of Honeywell and its Affiliates and not the knowledge of the
individuals set forth in Section 10.2(a)(xvi) of the Disclosure Schedule.
43
(b) Honeywell hereby agrees that following the Closing
Date it shall hold the SPS Confidential Information in confidence and not use or
disclose or cause or permit to be used or disclosed any of the SPS Confidential
Information for any reason or purpose whatsoever, except and to the extent any
disclosure of SPS Confidential Information is required by Law or appropriate
court order and sufficient advance written notice thereof, if permitted, is
provided to Purchaser to permit Purchaser to seek a protective order or other
appropriate remedy. The foregoing obligations of Honeywell and its Subsidiaries
shall be in addition to and not lieu of any protections available to Purchaser
pursuant to any applicable Law regarding the protection of trade secrets. The
provisions of this Section 5.15 shall expire on the fifth anniversary of the
Closing.
5.16 OTHER TRANSACTIONS. Honeywell shall, and shall cause each of
its Affiliates and Subsidiaries to, and shall direct its representatives to,
immediately cease any existing solicitations, discussions or negotiations with
any Person that has made or indicated an intention to make an investment in or
takeover proposal for the Company, the SPS Business or any Subsidiary of the
Company or other substantial portion thereof. Honeywell shall promptly, and in
any event not later than ten (10) days following the date hereof, request that
each Person who has executed a confidentiality agreement in connection with that
Person's consideration of a transaction involving the Company or the SPS
Business return or destroy all non-public information furnished to that Person
by or on behalf of Honeywell or its Subsidiaries.
5.17 FINANCING.
(a) Purchaser shall use its reasonable best efforts to
arrange and obtain as of the Closing the debt financing under, and on the terms
and conditions described in, the Debt Commitment Letter (the "DEBT FINANCING"),
including using reasonable best efforts to (i) negotiate definitive agreements
with respect thereto on terms and conditions contained therein and (ii) to
satisfy or cause to be waived all conditions in such definitive agreements.
Prior to the Closing, Purchaser shall not agree to any amendment or modification
of the Debt Commitment Letter that would adversely affect Purchaser's ability to
consummate the transactions contemplated hereby without the prior written
consent of Honeywell. To the extent that the Debt Commitment Letter is
terminated or any or all of the borrowings or amounts under the Debt Commitment
Letter are otherwise unavailable for any reason, Purchaser shall give Honeywell
prompt notice thereof and use its reasonable best efforts (with the reasonable
cooperation of Honeywell) to arrange for alternative financing in an amount at
least equal to that contemplated by the Debt Commitment Letter, provided that
nothing shall obligate Purchaser to enter into any replacement financing if the
terms and conditions of such replacement financing are materially less favorable
to Purchaser than the terms and conditions of the Debt Commitment Letter;
(b) As soon as reasonably practicable, Honeywell shall
provide, and shall cause its Subsidiaries (including the Company) and its and
their representatives to provide, including through the employees of the Company
and its Subsidiaries or any employees of Honeywell and its Affiliates who are
actively involved in the SPS Business,
44
reasonable and customary cooperation in connection with the arrangement of the
Debt Financing as may be requested by Purchaser (provided that such requested
cooperation does not unreasonably interfere with the ongoing operations of the
Company and its Subsidiaries), including:
(i) participation in meetings, drafting
sessions, road show presentations, bank presentations, rating agency
presentations and due diligence sessions at times to be mutually agreed
and after reasonable notice;
(ii) furnishing Purchaser and its financing
sources with financial and other pertinent information regarding the
Company and its Subsidiaries as may be reasonably requested by
Purchaser and to the extent reasonably available;
(iii) assisting Purchaser and its financing
sources in the preparation of (A) an offering document for any debt
raised to complete the transactions contemplated hereby, (B) materials
for rating agency presentations, and (C) business projections;
(iv) preparation, review and provision of the
following historical financial statements required for the offering
documents for the Debt Financing (A) audited annual financial
statements (statements of income, cash flow statements, statements of
stockholder equity for the 2002, 2003 and 2004 fiscal years and balance
sheets as of December 31, 2003 and 2004) and notes thereto of the
Company and its Subsidiaries (the "NOVAR GROUP"), (B) unaudited interim
financial statements (statements of income and cash flow statements for
the nine months ended September 30, 2005 and the nine months ended
September 30, 2004 and an unaudited balance sheet as of September 30,
2005) of the Novar Group, (C) audited financial statements of the SPI
Group, for the 2001 and 2000 fiscal years, sufficient for the
preparation of selected financial statements for those fiscal years
complying with Item 301 of Regulation S-K, (D) a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," relating to the Novar Group, for the periods described in
(A) and (B), above, complying with Item 303 of Regulation S-K and (E) a
section relating to "Quantitative and Qualitative Disclosures About
Market Risk" for the Novar Group, complying with Item 305 of Regulation
S-K. The periods presented in the financial statements described in (A)
and (B) above shall be updated by Honeywell (or its accountants) for
the periods required in order for such information to comply with
applicable requirements of Regulation S-X with respect to the staleness
of such information, and the information described in (D) and (E) above
shall be updated by Honeywell (or its accountants) to reflect any such
update in the financial statements described in (A) and (B).
Collectively, all of the items described above in this clause (iv) are
referred to in this Agreement as the "DEBT FINANCING HISTORICAL
FINANCIAL INFORMATION." Collectively, all of the items described in (A)
and (B) of this clause (iv) are referred to in this Agreement as the
"RECENT FINANCIAL STATEMENTS." If the
45
Closing Date occurs after December 31, 2005, then, to the extent
preliminary financial information for the year ending December 31, 2005
with respect to the SPI Group is available, Honeywell shall use its
commercially reasonable efforts to provide such available information
to Purchaser prior to the Closing Date. All of the financial statements
described in (A), (B) and (C) above shall be prepared in accordance
with GAAP and shall comply in all material respects with Regulation S-X
as in effect from time to time for such financial statements if they
were to be included in a Registration Statement on Form S-1 of the
Novar Group (in the case of the financial statements described in (A)
and (B) above) or the SPI Group (in the case of the financial
statements described in (C) above), relating to debt securities and
related guarantees issued by the Novar Group or SPI Group, as
applicable. The 2005 financial statements described in (B) above shall
reflect specific allocations of the purchase price paid by Honeywell
for the Novar Group, in accordance with Statements of Financial
Accounting Standards No. 141, "Business Combinations." It is
acknowledged and understood by Purchaser and Honeywell and its
Subsidiaries that the periods to be presented in the financial
statements described in (B) above will include financial statements
prepared on a predecessor basis with respect to the period from January
1, 2005 to March 31, 2005;
(v) fully cooperating in the preparation of pro
forma financial information (and notes thereto) for the Novar Group
(including by providing supplemental historical information and
assisting and advising in the calculation of all necessary
allocations), prepared (except in the case of clause (D) below) in
accordance with Article 11 of Regulation S-X, giving pro forma effect
to the transactions contemplated by this Agreement and the financing
and other transactions related thereto, including (A) a pro forma
balance sheet as of September 30, 2005, (B) a pro forma income
statement for the nine months ended September 30, 2005, (C) a pro forma
income statement for the fiscal year ended December 31, 2004 and (D) a
pro forma income statement for the 12 months ended September 30, 2005.
The Debt Financing Pro Forma Financial Information shall be updated for
the periods required in order for such information to comply with
applicable requirements of Regulation S-X with respect to the staleness
of such information. The financial information described above in this
clause (v) is referred to in this Agreement as the "DEBT FINANCING PRO
FORMA FINANCIAL INFORMATION";
(vi) reasonably cooperating with the marketing
efforts of Purchaser and its financing sources for any debt raised by
Purchaser to complete the transactions contemplated hereby;
(vii) reasonably facilitating the pledge of
collateral;
(viii) providing reasonable assistance to Purchaser
in the negotiation of the specific terms of the Debt Financing,
including participating in meeting and drafting sessions with respect
to the terms of any indenture,
46
credit agreement or facility (and schedules thereto), the terms of any
related security documents (and schedules thereto) and the terms of
purchase agreements relating to debt securities (including
representations and warranties);
(ix) using reasonable efforts to cause in-house
legal counsel of the Company or its Subsidiaries to provide legal
opinions on customary matters; and
(x) using reasonable efforts to cause the
independent auditor of the Novar Group to cooperate in the arrangement
of the Debt Financing, including by participating in meetings, drafting
sessions and due diligence sessions and to provide any opinions,
consents or comfort letters with respect to the Debt Financing
Historical Financial Information that are, in each case, reasonably
customary for offerings conducted under Rule 144A of the Securities Act
of 1933, as amended (in the case of a Debt Financing that takes the
form of an offering conducted under Rule 144A);
(c) Honeywell shall provide (or cause to be provided)
unaudited financial information of the Novar Group, for the 2001 and 2000 fiscal
years, sufficient for the preparation of selected financial data for those
fiscal years complying with Item 301 of Regulation S-K (the "SELECTED FINANCIAL
INFORMATION"). The Selected Financial Information shall be prepared in
accordance with GAAP and shall comply in all material respects with Regulation
S-X as in effect from time to time for such financial information if they were
to be included in a Registration Statement on Form S-1 of the Novar Group,
relating to debt securities and related guarantees issued by the Novar Group;
PROVIDED, that none of Honeywell or its Subsidiaries shall be required to pay
any commitment or other similar fee or incur any other Liability or cost or
expense, and Purchaser shall indemnify and hold harmless Honeywell for any
Liabilities that it may incur, solely in connection with any such financing or
the actions contemplated by this Section 5.17, including the Selected Financial
Information (other than the fees and expenses associated with the preparation,
review and provision of the audited financial statements and unaudited financial
statements of the Novar Group, which shall be borne by Honeywell or fully
reflected as current liabilities in Final Net Working Capital) (it being
understood that nothing shall be deemed to limit Purchaser's rights with respect
to the representations, warranties and covenants set forth in this Agreement
(including the Disclosure Schedule) or to the rights set forth in this
Agreement, including Article VII or Article IX).
5.18 CLOSING CASH BALANCE. Honeywell shall use its reasonable
efforts to cause all cash and cash equivalents held by any of the Companies or
their Subsidiaries as of the Effective Time to be transferred to Honeywell or
one or more of its Subsidiaries (other than the Companies and their
Subsidiaries) prior to the Closing; PROVIDED, HOWEVER, that to the extent any
cash or cash equivalents held by any of the Companies or their Subsidiaries as
of the Effective Time is not so transferred prior to the Closing, the
47
amount of such cash and cash equivalents not so transferred shall be reflected
as a current asset in the Preliminary Net Working Capital and the Final Net
Working Capital.
5.19 TRANSITION SERVICES. Prior to the Closing, Honeywell and
Purchaser shall negotiate in good faith a transition services agreement for the
provision of any services which either party may reasonably request (to the
extent that such services have been performed by or on behalf of the SPS
Business), which services shall be provided at an amount equal to the cost of
providing such services (and, in any event, the recipient of such transition
services shall be responsible for all out-of-pocket costs incurred by the
provider thereof in connection with the provision of such services). In any
event, Purchaser shall provide those services that are reasonably requested by
Honeywell in connection with its preparation of any Tax Return that include the
Company or any of its Subsidiaries and that relate to any pre-Closing period,
including if appropriate the preparation of the entire Tax Return. Purchaser
shall be entitled to charge Honeywell for such services an amount equal to the
cost of internal salary time (without markup for any overhead) and out-of-pocket
third party preparation fees.
5.20 FUTURE TRANSACTION.
(a) In the event that Purchaser or any of its Affiliates
consummates an SPS Divestiture on or prior to the one-year anniversary of the
Closing Date and receives Net Consideration of at least Eight Hundred Seventy
Five Million Dollars ($875,000,000), Purchaser shall pay to Honeywell, within
twenty-five (25) business days following the consummation of such SPS
Divestiture, an amount of cash (in immediately available funds) equal to 50% of
the excess of such Net Consideration over Eight Hundred Seventy Five Million
Dollars ($875,000,000).
(b) For purposes hereof:
(i) "NET CONSIDERATION" means, without
duplication, the aggregate value of all consideration received by
Purchaser or its Affiliates in an SPS Divestiture, which shall be
calculated to include the value of all Indebtedness of the SPS Business
which remains outstanding as of the closing of such SPS Divestiture
(net of all cash and cash equivalents of the Company, its Subsidiaries
or the SPS Business), in each case, net of all transactions fees and
expenses and other out-of-pocket expenses incurred by Purchaser and its
Affiliates in connection with such SPS Divestiture.
(ii) "SPS DIVESTITURE" means any sale or other
disposition, in one transaction or a series of related transactions, of
all or substantially all of the SPS Business (whether by way of asset
sale, stock offering or sale, distribution, merger, reorganization,
liquidation or the like); PROVIDED, HOWEVER, that none of (x) a
spin-off or other disposition of all or any portion of the SPS Business
to the stockholders of Purchaser (or any successor thereof), (y) any
change of control, or other issuance, sale or disposition of the equity
securities, of Purchaser (or any successor thereof) or (z) any other
sale, issuance or other disposition of the SPS Business to an Affiliate
of Purchaser or which
48
results in Purchaser and its Affiliates retaining greater than 50% of
the equity interests in the SPS Business shall be deemed to constitute
an SPS Divestiture; PROVIDED, HOWEVER that, for the avoidance of doubt,
the foregoing clause (z) shall not apply if Purchaser has sold
substantially all of the assets of the SPS Business to a Person who is
not (or as a result of the transaction does not become) an Affiliate of
Purchaser.
(c) For purposes of calculating the Net Consideration, if
all or any portion of the consideration involved in the SPS Divestiture is in
the form of: (i) cash, the consideration shall be valued based on the face value
of the cash; (ii) publicly traded securities, the consideration shall be valued
based on the volume-weighted average of the closing price of such securities for
the twenty (20) trading days immediately preceding the date of the consummation
of the SPS Divestiture; (iii) securities that are not publicly traded until the
date of completion of the SPS Divestiture, the consideration shall be valued
based on the volume-weighted average closing price of such securities for the
twenty (20) trading days immediately following the completion of the SPS
Divestiture; or (iv) any other consideration, the consideration shall be valued
at its fair market value as Honeywell and Purchaser shall mutually agree, acting
reasonably. In the event of any disagreement between the parties with respect to
the calculation of the Net Consideration received in any SPS Divestiture, the
matter will be submitted to an internationally recognized accounting firm to be
agreed upon by the parties, provided that such firm may not be the auditors of
either Honeywell or Purchaser. The decision of such accounting firm as to the
Net Consideration received in any SPS Divestiture will be final and binding on
the parties.
(d) Notwithstanding anything to the contrary in this
Agreement, none of the rights of Honeywell set forth in this Section 5.20 shall
be assignable to any other Person.
ARTICLE VI
CLOSING CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF HONEYWELL AND PURCHASER. The
respective obligations of Honeywell, on the one hand, and Purchaser, on the
other hand, to consummate the transactions contemplated by this Agreement are
subject to the fulfillment or waiver, on the Closing Date, of each of the
following conditions:
(a) there shall not be in effect any Governmental Order
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; and
(b) any required waiting periods (including any extension
thereof) applicable to the consummation of the transactions contemplated by this
Agreement under the HSR Act shall have terminated or expired.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PURCHASER. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement
49
is subject to the fulfillment, on the Closing Date, of each of the following
conditions (any or all of which may be waived by Purchaser in whole or in part
in its sole discretion):
(a) the representations and warranties of Honeywell
contained in this Agreement (disregarding any SPS Material Adverse Effect,
materiality or other similar qualifiers therein) shall be true and correct in
all respects on and as of the Closing Date (except to the extent such
representations and warranties shall have been expressly made as of an earlier
date, in which case such representations and warranties shall have been true and
correct as of such earlier date) with the same force and effect as if made on
and as of the Closing Date, except to the extent that any failures of such
representations and warranties to be so true and correct would not, individually
or in the aggregate, reasonably be expected to have resulted in an SPS Material
Adverse Effect; in addition, the representations and warranties contained in
Section 3.4 shall be true and correct in all material respects on and as of the
Closing Date;
(b) Honeywell shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing Date;
(c) Purchaser shall have received a certificate of an
officer of Honeywell (which officer shall be reasonably satisfactory to
Purchaser) that the conditions set forth in paragraphs (a) and (b) above have
been satisfied;
(d) Honeywell shall have furnished Purchaser with a
certificate stating that Honeywell is not a "foreign" person within the meaning
of Section 1445 of the Code, which certificate shall set forth all information
required by, and otherwise be executed in accordance with, Treas. Reg. ss.
1.1445-2(b)(2);
(e) since the date of this Agreement, there shall have
been no event, condition or change, or worsening of any existing event,
condition or change, that would, individually or in the aggregate, reasonably be
expected to have an SPS Material Adverse Effect;
(f) since the date of this Agreement, there not having
occurred and be continuing a material disruption of or material adverse change
in the markets for new issuances of leveraged loans or high yield securities
that is caused by a (A) suspension or material limitation in trading of
securities generally on the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market or establishment of minimum or maximum trading
prices or maximum ranges for prices for securities on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market, or by such
other exchange, regulatory body or governmental authority having jurisdiction
over the trading of securities on U.S. public financial markets, (B) declaration
of a banking moratorium by federal or state authorities or declaration of a
moratorium in foreign exchange trading by major international banks or persons,
(C) declaration by the United States of a national emergency or war or (D)
material act of terrorism occurring in the United States, which material
disruption or
50
material adverse change shall have resulted in the failure of the "Market MAC"
condition in the Debt Commitment Letter to be satisfied or waived;
(g) Purchaser shall have been provided with (i) the Debt
Financing Historical Financial Information and the Selected Financial
Information and (ii) any auditors comfort letters and opinions described in
Section 5.17(b)(ix) and Section 5.17(b)(x) as may be requested immediately prior
to or simultaneously with the execution of an agreement with a placement agent
or at a time immediately prior to and/or simultaneously with the closing of any
portion of the Debt Financing.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF HONEYWELL. The
obligations of Honeywell to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, on the Closing Date, of each of the
following conditions (any or all of which may be waived by Honeywell in whole or
in part in their sole discretion):
(a) the representations and warranties of Purchaser
contained in this Agreement (disregarding any Purchaser Material Adverse Effect,
materiality or other similar qualifiers therein) shall be true and correct in
all respects on the date hereof and on and as of the Closing Date (except to the
extent such representations and warranties shall have been expressly made as of
an earlier date, in which case such representations and warranties shall have
been true and correct as of such earlier date) with the same force and effect as
if made on and as of the Closing Date, except to the extent that any failures of
such representations and warranties to be so true and correct would not,
individually or in the aggregate, reasonably be expected to have resulted in a
Purchaser Material Adverse Effect;
(b) Purchaser shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing Date; and
(c) Honeywell shall have received a certificate of an
executive officer of Purchaser that the conditions set forth in paragraphs (a)
and (b) above have been satisfied.
ARTICLE VII
CERTAIN TAX MATTERS
7.1 TAX RETURNS. Except as otherwise provided in Section 7.5:
(a) Honeywell shall prepare and file or cause to be
prepared and filed when due all Tax Returns that are required to be filed by or
with respect to the Company and its Subsidiaries for Tax periods ending on or
before the Closing Date, and Honeywell shall prepare such Tax Returns in a
manner consistent with past practices, except as required by applicable Law, and
shall remit or cause to be remitted when due all Taxes shown due on such Tax
Returns, as well as all Taxes payable by it (or them) that are due prior to the
Closing Date for which no such Tax Return is required; provided,
51
however, that if any such Tax Return to be filed or any Tax required to be paid
in accordance with this Section 7.1(a) is to be filed or paid after the Closing
Date, Honeywell shall remit to Purchaser the amounts required to be so paid no
later than five (5) business days prior to the due date for any such payment,
and Purchaser shall file and pay when due such Tax Returns and such Taxes.
(b) With respect to any Tax Return described in Section
7.1(a), Honeywell shall provide Purchaser with such Tax Returns (including all
necessary supporting schedules and information), or, in the case of any
consolidated, combined or unitary Tax Return that includes Honeywell or any
Affiliate, a pro forma draft of the portion of such Tax Return (including all
necessary supporting schedules and information) reflecting only the tax items of
the Company or such Subsidiaries of the Company, as the case may be, at least 30
days prior to the due date (including any extension thereof) for the filing of
such Tax Return, and Purchaser and its authorized representatives shall have the
right to review and comment on such Tax Return (including any supporting
schedules or information) prior to the filing of such Tax Return. If Purchaser
disputes an item on such Tax Return on the grounds that it is inconsistent with
past practice and could reasonably be expected to have an adverse effect on
future Tax periods, it shall notify Honeywell and the Seller of such disputed
item (or items) and the basis for its objection. The parties shall act in good
faith to resolve any such dispute prior to the date on which the relevant Tax
Return is required to be filed. If the parties cannot resolve any disputed item,
the item in question shall be resolved by the Independent Accounting Firm. The
fees and expenses of such accounting firm shall be borne equally by Honeywell
and Purchaser. Purchaser's failure to comment shall not prevent or preclude
Honeywell from timely filing with the appropriate Taxing authority such Tax
Returns. Purchaser shall at its own cost and expense fully and accurately
complete and submit any Tax data packages required by Honeywell within the time
periods established by the Tax Department of Honeywell consistent with past
practices.
(c) Purchaser shall prepare and file or cause to be
prepared and filed when due all Tax Returns that are required to be filed by or
with respect to the Company and its Subsidiaries for Tax periods ending after
the Closing Date (other than Tax Returns with respect to periods for which a
consolidated, unitary or combined Tax Return of the Seller or any Subsidiary of
the Seller other than the Company or the Subsidiaries of the Company will
include the Company or any of its Subsidiaries). In the case of Tax Returns
relating to taxable periods beginning before and ending after the Closing Date
("STRADDLE PERIODS"), to the extent such Tax Returns relate to the portion of
such Straddle Period ending on the Closing Date, Purchaser shall prepare such
Tax Returns in a manner consistent with past practices and shall remit or cause
to be remitted any Taxes due in respect of such Tax Returns. With respect to any
such Tax Returns filed with respect to any Straddle Period, Honeywell shall be
responsible for the portion of Taxes due in respect of such Tax Returns relating
to the portion of such Straddle Period ending on the Closing Date, determined in
accordance with Section 7.4(c). Purchaser shall notify Honeywell of any amounts
due from Honeywell in respect of any such Tax Return no later than ten (10)
business days prior to the date on which such Tax
52
Return is due, and Honeywell shall remit such payment to Purchaser no later than
five (5) business days prior to the date such Tax Return is due.
(d) With respect to any Tax Return described in Section
7.l (c) as to which an amount of Tax is allocable to, or would otherwise be
borne by, Honeywell, or any of its Subsidiaries (other than the Company or its
Subsidiaries), Purchaser shall provide Honeywell with a copy of such completed
Tax Return (including all necessary supporting schedules and information) at
least 30 days prior to the due date (including any extension thereof) for the
filing of such Tax Return, and Honeywell and its authorized representatives
shall have the right to review and comment on such Tax Return (including any
supporting schedules or information) prior to the filing of such Tax Return. If
Honeywell disputes an item on such Tax Return on the grounds that it is
inconsistent with past practice and could reasonably be expected to have an
adverse affect on Tax periods ending on or before the Closing Date, it shall
notify Purchaser of such disputed item (or items) and the basis for its
objection. The parties shall act in good faith to resolve any such dispute prior
to the date on which the relevant Tax Return is required to be filed. If the
parties cannot resolve any disputed item, the item in question shall be resolved
by the Independent Accounting Firm. The fees and expenses of such accounting
firm shall be borne equally by Honeywell and Purchaser. Honeywell's failure to
comment shall not prevent or preclude Purchaser from timely filing with the
appropriate Taxing authority such Tax Returns.
7.2 COOPERATION ON TAX MATTERS; TAX AUDITS AND CONTESTS.
(a) After the Closing Date, except as provided in (b) and
(c) below, Purchaser shall control the conduct, through counsel of its own
choosing, of any audit, claim for refund, or administrative or judicial
proceeding involving any asserted Tax liability or refund with respect to the
Company or any of its Subsidiaries (any such audit, claim for refund, or
proceeding relating to an asserted Tax liability referred to herein as a
"CONTEST").
(b) In the case of a Contest after the Closing Date that
relates solely to Taxes for which Purchaser is indemnified under Section 7.4,
Honeywell shall control the conduct of such Contest, but Purchaser shall have
the right to participate in such Contest at its own expense, and Honeywell shall
not settle, compromise and/or concede any portion of such Contest that is
reasonably likely to affect the Tax liability of the Company or its Subsidiaries
for any taxable year (or portion thereof) beginning after the Closing Date
without the consent of Purchaser, which consent shall not be unreasonably
withheld or delayed; provided, that if Honeywell fails to assume control of the
conduct of any such Contest within a reasonable period following the receipt by
Honeywell of notice of such Contest, Purchaser shall have the right to assume
control of such Contest and shall have the right to settle, compromise and/or
concede such Contest in its sole discretion.
(c) In the case of a Contest after the Closing Date that
relates both to Taxes for which Purchaser is indemnified under Section 7.4 and
Taxes for which Purchaser is not indemnified under Section 7.4, Purchaser shall
control the conduct of
53
such Contest, but Honeywell shall have the right to participate in such Contest
at its own expense, and Purchaser shall not settle, compromise and/or concede
any portion of such Contest as relates to a period ending on or before the
Closing Date, or is reasonably likely to effect the Tax liability of the Company
or its Subsidiaries for any taxable year (or portion thereof) beginning prior to
the Closing Date, without the consent of Honeywell, which consent shall not be
unreasonably withheld or delayed.
(d) Purchaser and Honeywell shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Article VII and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Honeywell agrees (i) to retain and maintain all books and records
with respect to Tax matters pertinent to the Company and its Subsidiaries
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
Purchaser, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any Taxing Authority,
and (ii) to give Purchaser reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if Purchaser so
requests, Honeywell shall allow Purchaser to take possession of such books and
records.
(e) Purchaser and Honeywell further agree, upon request,
to use their best efforts to obtain any certificate or other document from any
Governmental Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including with respect to the
transactions contemplated hereby).
7.3 TAX SHARING AGREEMENTS. All Tax Sharing Agreements or similar
agreements with respect to or involving the Company and its Subsidiaries shall
be terminated as of the Closing Date and, after the Closing Date, the Company
and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
7.4 TAX INDEMNIFICATIONS.
(a) From and after the Closing Date, Honeywell shall be
liable for, and shall indemnify and hold the Purchaser Indemnified Parties
harmless against any and all liabilities, losses, damages, claims, costs,
expenses, interest, awards, judgments and penalties (including, without
limitation, reasonable attorneys', accountants' and other outside consultants'
fees and expenses) suffered or incurred (each a "TAX LOSS" and collectively, the
"TAX LOSSES") arising out of:
(i) all Taxes imposed on any member of any
Affiliated Group that includes Honeywell with which the Company or its
Subsidiaries files or filed a Tax Return on a consolidated, combined or
unitary basis for a taxable year (of the Company or any Subsidiary
thereof) beginning before the Closing
54
Date and for which the Company or Subsidiary thereof is liable pursuant
to Treas. Reg. 1.1502-6, Treas. Reg. 1.1502-78 or a comparable
provision of Law, solely as a result of its inclusion in such a
consolidated, combined or unitary Tax Return;
(ii) except as provided in Section 7.6, all Taxes
arising out of any transactions contemplated by this Agreement; and
(iii) all Taxes or other payments required to be
paid after the Closing Date by the Company or any of its Subsidiaries
to any party (other than to the Company or any of its Subsidiaries)
under any Tax Sharing Agreement entered into on or before the Closing
Date (whether written or not) by reason of being a
successor-in-interest or transferee of another entity.
(b) Honeywell shall be liable for, and shall indemnify
and hold harmless the Purchaser Indemnified Parties, the Company, and the
Company's Subsidiaries against, Tax Losses arising out of all of the following
Taxes: (i) Taxes imposed on the Company or any of its Subsidiaries with respect
to taxable periods of the Company or such Subsidiaries ending on or before the
Closing Date; (ii) Taxes imposed on the Company or any of its Subsidiaries which
are allocable, pursuant to Section 7.4(c), to the portion of such period ending
on the Closing Date; and (iii) Taxes arising out of any breach of any
representation contained in Section 3.6 or 3.7 or any covenant contained in
Section 5.1(g) with respect to any Straddle Period.
(c) In the case of Taxes that are payable with respect to
the Straddle Period, the portion of any such Tax that is allocable to the
portion of the Straddle Period ending on the Closing Date shall be:
(i) in the case of Taxes that are either (x)
based upon or related to income or receipts, or (y) imposed in
connection with any sale or other transfer or assignment of property
(real or personal, tangible or intangible) (other than conveyances
pursuant to this Agreement), deemed equal to the amount which would be
payable if the taxable year ended on the Closing Date; and
(ii) in the case of Taxes imposed on a periodic
basis with respect to the assets or otherwise measured by the level of
any item, deemed to be the amount of such Taxes for the entire period
(or, in the case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding period), multiplied
by a fraction the numerator of which is the number of calendar days in
the period ending on the Closing Date and the denominator of which is
the number of calendar days in the entire Straddle Period. Any credit
or refund resulting from an overpayment of Taxes for a Straddle Period
shall be prorated based upon the method employed in this Section 7.4(c)
taking into account the type of the Tax to which the refund relates. In
the case of any Tax based upon or measured by capital (including net
worth or long term debt) or intangibles, any amount thereof required to
be allocated under this Section 7.4(c) shall be computed by reference
to the level of such items on the Closing Date.
55
All determinations necessary to effect the foregoing allocations shall
be made in a manner consistent with prior practice of the Company.
7.5 TAX INDEMNIFICATION PROCEDURES.
(a) After the Closing, each party to this Agreement
(whether Purchaser or Honeywell, as the case may be) shall promptly notify the
other party in writing of any demand, claim or notice of the commencement of an
audit received by such party from any Taxing Authority or any other Person with
respect to Taxes for which such other party is liable pursuant to Section 7.4;
PROVIDED, HOWEVER, that a failure to give such notice will not affect such other
party's rights to indemnification under this Article VII, except to the extent
that such party is actually prejudiced thereby. Such notice shall contain
factual information (to the extent known) describing the asserted Tax liability
and shall include copies of the relevant portion of any notice or other document
received from any Taxing Authority or any other Person in respect of any such
asserted Tax liability.
(b) Payment by an indemnitor of any amount due to an
indemnitee under Section 7.4 of this Agreement shall be made within ten (10)
days following written notice by the indemnitee that payment of such amounts to
the appropriate Taxing Authority or other applicable third party is due by the
indemnitee, provided that the indemnitor shall not be required to make any
payment earlier than five (5) business days before it is due to the appropriate
Taxing Authority or applicable third party. In the case of a Tax that is
contested in accordance with the provisions of Section 7.2, payment of such
contested Tax will not be considered due earlier than the date a "final
determination" to such effect is made by such Taxing Authority or a court. For
this purpose, a "final determination" shall mean a settlement, compromise, or
other agreement with the relevant Taxing Authority, whether contained in an IRS
Form 870 or other comparable form, or otherwise, or such procedurally later
event, such as a closing agreement with the relevant Taxing Authority, and
agreement contained in IRS Form 870-D or other comparable form, an agreement
that constitutes a "determination" under Section 1313(a)(4) of the Code, a
deficiency notice with respect to which the period for filing a petition with
the tax court or the relevant state, local or foreign tribunal has expired or a
decision of any court of competent jurisdiction that is not subject to appeal or
as to which the time for appeal has expired.
(c) All amounts required to be paid pursuant to this
Article VII shall be paid promptly in immediately available funds by wire
transfer to a bank account designated by the indemnified party.
(d) Any payments required pursuant to this Article VII
that are not made within the time period specified in this Section 7.5 shall
bear interest at a rate and in the manner provided in the Code for interest on
underpayments of federal income tax.
7.6 CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other similar Taxes and fees (including any penalties and
interest)
56
incurred in connection with this Agreement, shall be shared equally by Honeywell
and Purchaser, and Purchaser shall file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees (and Honeywell shall promptly reimburse
Purchaser for one half of the expenses incurred by Purchaser in connection with
any such filing).
7.7 TAX REFUNDS. Honeywell shall be entitled to (a) all refunds of
Taxes received by the Company and its Subsidiaries with respect to taxable
periods of the Company and its Subsidiaries ending on or before the Closing Date
(other than refunds of Taxes attributable to carry backs of losses or credits
from taxable periods ending after the Closing Date), and (b) all refunds of
Taxes allocable to the portion of any Straddle Period ending on the Closing Date
as determined pursuant to Section 7.4(c). Purchaser shall cause the Company or
its Subsidiaries to pay any such Tax refunds received by any of the Company or
its Subsidiaries to Honeywell within ten (10) days of receipt thereof, net of
any increase in Taxes paid by Purchaser on account of receipt of such Tax refund
and all reasonable out-of-pocket expenses of Purchaser in obtaining such refund.
For purposes of this Section 7.7, Tax refunds shall include any Tax refunds that
are (i) actually received by the Company and its Subsidiaries or (ii) credited
against Tax liabilities of the Company and its subsidiaries for periods
beginning after the Closing Date or for the portion of any Straddle Period after
the Closing Date.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time
before the Effective Time as follows:
(a) by mutual written consent of Honeywell and Purchaser;
(b) by Honeywell or Purchaser on or after the four (4)
month anniversary of the date hereof (or, if Honeywell has not provided (or
caused to be provided) the Recent Financial Information to Purchaser on or prior
to November 15, 2005, the five (5) month anniversary of the date hereof) (the
"OUTSIDE DATE") if the Closing shall not have occurred by the close of business
on such date; provided, however, that if on the Outside Date the condition to
Closing set forth in Section 6.2(f) shall not have been satisfied but all other
conditions to Closing set forth in Article VI shall have been satisfied (or
waived, if permitted), or capable of being satisfied by the Outside Date, then
the Outside Date shall be extended to the two (2) month anniversary of the
Outside Date if Honeywell notifies the Purchaser in writing of its election to
so extend the Outside Date; PROVIDED, FURTHER, HOWEVER that the breach by the
terminating party in any material respect of any of its covenants or other
obligations hereunder shall not be the principal cause of the failure of the
Closing to occur by the Outside Date;
(c) by Honeywell or Purchaser if there shall be in effect
a final nonappealable Governmental Order restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby;
57
(d) by Purchaser if there shall have been a breach in any
material respect of any of the covenants or agreements on the part of Honeywell
set forth in this Agreement or a breach of any of the representations and
warranties of Honeywell that would cause the conditions precedent set forth in
Section 6.2(a) not to be satisfied, in each case which has not been cured within
30 days after receipt of notice of such breach;
(e) by Honeywell if there shall have been a breach in any
material respect of any of the covenants or agreements on the part of Purchaser
set forth in this Agreement or a breach of any of the representations and
warranties of Purchaser that would cause the conditions precedent set forth in
Section 6.3(a) not to be satisfied, in each case which has not been cured within
30 days after receipt of notice of such breach; and
(f) by Purchaser if Honeywell shall not have provided (or
caused to be provided) the Recent Financial Statements to Purchaser on or prior
to December 31, 2005.
8.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement pursuant to this Article VIII, this Agreement
(other than as set forth in Section 3.21, Section 3.22, Section 4.6, Section
4.9, the first sentence of Section 5.4(a), Section 5.8, this Section 8.2,
Section 10.7, Section 10.8 and Section 10.9) shall become void and of no effect
with no liability on the part of any party hereto (or any of its Affiliates or
representatives); PROVIDED, HOWEVER, no such termination shall relieve any party
hereto from any liability for damages resulting from any willful or intentional
breach of this Agreement.
ARTICLE IX
NO SURVIVAL; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties of the parties contained in Articles III and IV
shall, subject to the last sentence of this Section 9.1, terminate on the date
that is one (1) year after the Closing Date, except that (a) the representations
and warranties contained in Section 3.11 shall survive for three (3) years
following the Closing, (b) the representations and warranties contained in
Section 3.7 and Section 3.12 shall survive the Closing until the date that is 60
days following the expiration of the statute of limitations (including all
periods of extension, whether automatic or permissive) for the applicable
representation and warranty and (c) the representations and warranties contained
in Section 3.2, Section 3.4, Section 3.21, Section 3.22, Section 4.2, Section
4.6 and Section 4.9 shall survive indefinitely following the Closing. All
covenants and agreements contained herein shall survive the Closing and remain
in full force and effect in accordance with their terms until the expiration of
the applicable statute of limitations (other than Section 5.1, which shall
terminate on the date that is one (1) year after the Closing Date). The period
of time a representation or warranty or covenant or agreement survives the
Closing pursuant to this Section 9.1 shall be the "SURVIVAL PERIOD" with respect
to such representation or warranty or covenant or agreement. In the event notice
of any claim for indemnification under this Article IX shall have been given
within the applicable Survival Period and
58
such claim has not been finally resolved by the expiration of such Survival
Period, the representations or warranties or covenants or agreements that are
the subject of such claim shall survive, but only to the extent related to the
facts and circumstances giving rise to such claim, until such matters are
finally resolved.
9.2 INDEMNIFICATION. Subject to the terms, conditions and
limitations set forth in this Article IX, from and after the Closing Date:
(a) Honeywell shall indemnify and hold harmless Purchaser
and its Affiliates (including the Company and its Subsidiaries) and each of
their respective officers, directors, members, partners, managers and employees
(collectively, the "PURCHASER INDEMNIFIED PARTIES") from and against any Losses
that are imposed on or incurred by the Purchaser Indemnified Parties arising out
of or related or attributable to (i) any breach of any representation or
warranty made by Honeywell in this Agreement, (ii) any failure to perform any
covenant or agreement of Honeywell set forth in this Agreement, (iii) any ERISA
Affiliate Liability, (iv) any Liabilities of the Company, Novar Investments
(USA) Inc., Novar Finance Inc. or Novar Holdco Inc. or any of their Subsidiaries
(other than Security Printing, Inc. and its Subsidiaries) under guarantees or
letters of credit given by them on behalf of Affiliates or any other Person to
the extent unrelated to the SPS Business (which shall include all of the Novar
Guarantees), (v) any Liabilities of the Company, Novar Investments (USA) Inc.,
Novar Finance Inc. or Novar Holdco Inc. or any of their Subsidiaries (other than
Security Printing, Inc. and its Subsidiaries), other than Permitted Holding
Company Liabilities (the Liabilities referred to in clause (iv) and (v), the
"EXCLUDED LIABILITIES"), and (vi) any Indebtedness outstanding as of the
Effective Time that is required to be discharged or otherwise extinguished prior
to the Closing pursuant to this Agreement but which is not so discharged or
otherwise extinguished prior to the Closing or any other Indebtedness that
constitutes an Excluded Liability.
(b) Purchaser shall indemnify and hold harmless Honeywell
and its Affiliates (other than the Company and its Subsidiaries) and each of
their respective officers, directors, members, partners, managers and employees
(collectively, the "SELLER INDEMNIFIED PARTIES") from and against any Losses
that are imposed on or incurred by the Seller Indemnified Parties arising out of
or related or attributable to (i) any breach of any representation or warranty
made by Purchaser in this Agreement and (ii) any failure to perform any covenant
or agreement of Purchaser set forth in this Agreement.
9.3 INDEMNIFICATION PROCEDURES.
(a) In order for a party (the "INDEMNIFIED PARTY") to be
entitled to any indemnification provided for under this Article IX in respect of
a claim made against the Indemnified Party by any Person who is not a party to
this Agreement (a "THIRD-PARTY CLAIM"), such Indemnified Party must notify the
indemnifying party hereunder (the "INDEMNIFYING PARTY") in writing of the
Third-Party Claim promptly following receipt by such Indemnified Party of notice
of the Third-Party Claim; PROVIDED, HOWEVER, that failure to give such
notification (or to provide any of the notices or documents contemplated by the
next sentence) shall not affect the indemnification provided
59
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, promptly following the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third-Party Claim, other than
those notices and documents separately addressed to the Indemnifying Party.
(b) Subject to the provisions related to the settlement
of Third-Party Claims set forth in Section 9.3(c), the Indemnifying Party will
have the right to defend against, negotiate, settle or otherwise deal with any
Third-Party Claim (other than a Third-Party Claim relating to or involving a
customer or supplier of the Company or its Subsidiaries (which shall be
controlled at all times by the Company or Purchaser, with counsel reasonably
satisfactory to Honeywell)) which relates to any Losses indemnified against
hereunder and to select counsel of its choice (which counsel shall be reasonably
acceptable to the Indemnified Party). If the Indemnifying Party does not, within
twenty-one (21) days of its receipt of notice of a Third-Party Claim pursuant to
Section 9.3(a), elect to defend against, negotiate, settle or otherwise deal
with any Third-Party Claim which relates to any Losses indemnified against
hereunder, the applicable Indemnified Party may defend against, negotiate,
settle or otherwise deal with such Third-Party Claim. If the applicable
Indemnified Party defends any Third-Party Claim, then the Indemnifying Party
shall promptly reimburse the applicable Indemnified Party for the reasonable
costs and expenses of defending such Third-Party Claim upon submission of
periodic bills. If the Indemnifying Party assumes the defense of any Third-Party
Claim, the applicable Indemnified Party may participate, at its own expense, in
the defense of such Third-Party Claim; PROVIDED, HOWEVER, that such applicable
Indemnified Party will be entitled to participate in any such defense with
separate counsel at the expense of the Indemnifying Party if (i) so requested by
the Indemnifying Party to participate or (ii) in the reasonable opinion of
counsel to the applicable Indemnified Party, a conflict or potential conflict
exists between the applicable Indemnified Party and the Indemnifying Party that
would make such separate representation advisable; PROVIDED, FURTHER, that
Indemnifying Party will not be required to pay for more than one (1) such
counsel for all Indemnified Parties in connection with any Third-Party Claim.
(c) If the Indemnifying Party chooses to defend or
prosecute a Third-Party Claim, the Indemnified Party shall (and shall cause the
applicable Indemnified Parties to) cooperate in the defense or prosecution
thereof. If the Indemnifying Party assumes the defense of a Third-Party Claim,
the other party shall (and shall cause the applicable Indemnified Parties to)
agree to any settlement, compromise or discharge of a Third-Party Claim that the
Indemnifying Party may recommend and that (i) by its terms obligates the
Indemnifying Party (or its Affiliates) to pay the full amount of the liability
in connection with such Third-Party Claim, (ii) does not require any payment,
admission or other action by, or limitation on, any Indemnified Party, and (iii)
releases all Indemnified Parties in connection with such Third-Party Claim. If
the Indemnifying Party elects not to assume the defense of a Third-Party Claim
or in the event of a Third-Party Claim relating to or involving a customer or
supplier of the Company or its Subsidiaries, the applicable Indemnified Parties
shall not admit any liability with respect to, or settle, compromise or
discharge, such Third-Party Claim
60
without the Indemnifying Party's prior written consent (which shall not be
unreasonably withheld, delayed or conditioned).
(d) In the event any Indemnified Party should have a
claim against any Indemnifying Party under this Article IX that does not involve
a Third-Party Claim, the Indemnified Party shall deliver notice of such claim to
the Indemnifying Party promptly following the Indemnified Party becoming aware
of the same. The failure by any Indemnified Party to so notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability that it may
have to such Indemnified Party under this Article IX, except to the extent that
the Indemnifying Party has been actually prejudiced by such failure.
9.4 INDEMNIFICATION LIMITATIONS.
(a) In no event shall Honeywell be liable for
indemnification pursuant to Section 9.2(a)(i) unless and until the aggregate of
all Losses with respect to Section 9.2(a)(i) that are imposed on or incurred by
the Purchaser Indemnified Parties exceeds Eight Million Dollars ($8,000,000)
(the "DEDUCTIBLE AMOUNT"), in which case the Purchaser Indemnified Parties shall
be entitled to indemnification for all Losses in excess of the Deductible
Amount; PROVIDED, HOWEVER, that any Losses in respect of breaches of the
representations and warranties contained in Sections 3.4, 3.7 and 3.11 (the
"EXCLUDED REPRESENTATIONS") shall be recoverable from the first dollar of Loss
and shall not be subject to the Deductible Amount (and, as such, shall not
reduce the Deductible Amount otherwise available). Notwithstanding the
foregoing, Honeywell shall not be required to make payments for indemnification
pursuant to Section 9.2(a)(i) in an aggregate amount in excess of One Hundred
Sixty Million Dollars ($160,000,000), other than in connection with breaches of
any of the Excluded Representations. Purchaser shall not be required to make
payments for indemnification pursuant to Section 9.2(b)(i) in an aggregate
amount in excess of One Hundred Sixty Million Dollars ($160,000,000).
(b) In calculating amounts payable to an Indemnified
Party hereunder, the amount of any indemnified Losses shall be determined
without duplication of any other Loss which is actually recovered pursuant to
Article VII or this Article IX and shall be computed net of payments actually
recovered by the Indemnified Party under any insurance policy with respect to
such Losses (it being understood and agreed that, without affecting the
Indemnified Party's right to indemnification hereunder (unless proceeds are
recovered), the Indemnified Party shall, where appropriate and commercially
reasonable, make claims under applicable insurance policies, other than
self-insurance or retrospective policies but that the Indemnified Party shall
have no obligation to engage in any litigation in connection therewith);
PROVIDED, HOWEVER, that the Purchaser Indemnified Parties shall have no
obligation to make any claim under any insurance policy in respect of Losses
related to any Excluded Liability or Indebtedness for which Honeywell is
obligated to indemnify pursuant to Section 9.2(a). Any indemnification payment
payable under this Agreement shall be net of any Tax Benefit actually realized
by the Indemnified Party in respect of any indemnified Loss. For purposes
hereof, "TAX BENEFIT" means any refund of Taxes paid or reduction in the amount
of Taxes which otherwise would have been paid as result of such indemnified
61
Loss (with the timing of the receipt or realization of such refund or reduction
to be estimated in good faith by the Indemnified Party), net of any increase in
Taxes paid by the Indemnified Party on account of receipt of the indemnification
payment. Purchaser shall cause its independent auditor to certify in writing to
Honeywell if and when Purchaser receives or realizes such refund or reduction,
and such certification shall be conclusive evidence of the fact and amount
thereof.
(c) In no event shall Honeywell or Purchaser be liable
for (i) any punitive or consequential damages regardless of the form of action
through which such damages are sought or (ii) any lost profits of any Person
(but only to the extent that such lost profits would be deemed to constitute
consequential damages), unless, in the case of clause (i) and (ii) above, but
subject to the other provisions of this Section 9.4, such damages are recovered
by a third party in a Third Party Claim pursuant to an order entered against a
Purchaser Indemnified Party or in a settlement agreement to which a Purchaser
Indemnified Party is a party (it being understood that the Purchaser Indemnified
Party shall promptly appeal any such order if Honeywell requests it to do so,
provided that Honeywell promptly pays all fees, expenses, costs and damages
incurred through to such date and pays all fees, expenses, costs and damages
when and as incurred after such date, in each case, which are incurred in
connection with such Third Party Claim and posts any necessary bonds pending
such appeal); PROVIDED that the foregoing shall not apply to indemnification for
Losses that are imposed on or incurred by the Purchaser Indemnified Parties
arising out of or related or attributable to (i) the Excluded Liabilities or
(ii) any Indebtedness for which Honeywell is obligated to indemnify pursuant to
Section 9.2(a)(iv). The Parties acknowledge that, subject to the other
provisions of Section 9.4, nothing in this Section 9.4(c) shall limit
Purchaser's right to seek damages (other than punitive or consequential damages)
corresponding to the diminution in value, if any, of the SPI Group as measured
against the Purchase Price arising out of or related to Seller's breach of the
representations, warranties and covenants set forth in this Agreement. By way of
illustration, in such event, Purchaser would be entitled to seek damages
corresponding to the amount by which Purchaser would have reduced the Purchase
Price paid at closing for the SPI Group (using the same valuation methodology
used by Purchaser at the time of its execution and delivery of this Agreement to
determine the amount of the Purchase Price) had Purchaser been aware of such
breach on the Closing Date.
(d) The remedies provided in this Article IX, Article VII
and, if the Restructuring Transactions are not consummated pursuant to Section
10.11(a), Section 10.11(b) shall be deemed the sole and exclusive remedies of
the parties, from and after the Closing Date, with respect to any and all claims
arising out of or related to this Agreement and the transactions contemplated
hereby, except with respect to claims based on fraud which shall, in any case,
be subject to the provisions of Sections 3.21, 3.22, 4.6, 4.9, 10.8 and 10.9 of
this Agreement. Nothing herein shall prevent a party from seeking injunctive
relief as provided in Section 5.14. All payments made pursuant to this Articles
VII and IX shall be deemed to be adjustments to the Purchase Price.
(e) Notwithstanding any other provision of this
Agreement, Honeywell shall not be liable for any Losses related to any breach or
inaccuracy of any
62
representation or warranty contained in Section 3.11 (Environmental Matters) to
the extent such Loss or Losses (i) arise from any conduct by any of the
Purchaser Indemnified Parties or the Company and its Subsidiaries after Closing,
including (A) any Management of any Materials of Environmental Concern and (B)
failure to comply with any Environmental Law (except for Continuing
Noncompliance); (ii) are not required to be incurred pursuant to any
Environmental Law or pursuant to any Environmental Claim; (iii) at any Property,
are required to be incurred by a clean-up or remediation standard that is more
costly than the lowest-cost clean-up standard reasonably applicable pursuant to
Environmental Laws to allow continued operation of the relevant Property in the
manner that it was operated at the Closing; or (iv) are detected or caused by
any Voluntary Environmental Investigation. For purposes of this paragraph, (i)
"MANAGEMENT" means generation, production, handling, distribution, processing,
storage, treatment, operation, transportation, recycling, reuse and/or disposal,
as those terms are defined in any Environmental Law; PROVIDED, HOWEVER, that
Management does not include the ongoing release of Materials of Environmental
Concern which is not known to the Company and its Subsidiaries if such release
results from a pre-closing condition; (ii) "VOLUNTARY ENVIRONMENTAL
INVESTIGATION" means any environmental sampling, monitoring or other surface or
subsurface investigation of the Property except to the extent required by any
Environmental Law or reasonably conducted in response to a Third-Party Claim
asserting liability for an environmental condition at the Property; and (iii)
"CONTINUING NONCOMPLIANCE" means any failure to comply with Environmental Laws
that began prior to the Closing and continues after the Closing, except that
Continuing Noncompliance shall not include any noncompliance after the date that
any officer, employee or agent of the Purchaser Indemnified Party either (i)
learned of the noncompliance or (ii) in the ordinary course of operating the SPS
Business, should have learned of the noncompliance, it being understood that the
ordinary course of operating the SPS Business shall be deemed not to include any
Voluntary Environmental Investigation.
(f) In the event that Honeywell is obligated to indemnify
any of the Purchaser Indemnified Parties for any clean-up or remediation
pursuant to this Agreement, Honeywell will have the right, but not the
obligation, to manage and control the clean-up or remediation; PROVIDED,
HOWEVER, that if Honeywell elects to manage and control the clean-up or
remediation (i) any such clean-up or remediation shall be conducted in a timely
manner consistent with applicable Environmental Laws and shall not unreasonably
interfere with the continued operations of the SPS Business; (ii) Honeywell
shall provide the Purchaser Indemnified Party with a reasonable opportunity to
review proposed governmental filings and material proposed remediation decisions
in connection with such clean-up or remediation; (iii) Honeywell shall
reasonably consult with the Purchaser Indemnified Party in connection with such
clean-up or remediation; and (iv) the approval of the Purchaser Indemnified
Party shall be required for any such governmental filings and remediation
decisions; PROVIDED, HOWEVER, that if such approval is unreasonably withheld or
delayed, Honeywell may proceed with the governmental filing or remediation
decisions as proposed by Honeywell; and (iv) in the event that Honeywell
requires access to any Property in connection with such clean-up or
63
remediation, Honeywell and the relevant Purchaser Indemnified Party shall enter
into a commercially reasonable access and indemnity agreement governing such
access.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made (a) on the date of delivery if delivered personally, or by telecopy or
facsimile, upon confirmation of receipt, (b) on the first business day following
the date of dispatch if delivered by a recognized next-day courier service, or
(c) on the fifth business day following the date of mailing if delivered by
registered or certified mail return receipt requested, postage prepaid and shall
be delivered personally or mailed by registered or certified mail (postage
prepaid, return receipt requested), sent by overnight courier or sent by
telecopy, to the applicable party at the following addresses or telecopy numbers
(or at such other address or telecopy number for a party as shall be specified
by like notice):
(a) if to Honeywell:
Honeywell International Inc.
000 Xxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: General Counsel and Senior Vice President
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) if to Purchaser:
M & F Worldwide Corp.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
64
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
10.2 CERTAIN DEFINITIONS; INTERPRETATION.
(a) For purposes of this Agreement, the following terms
shall have the following meanings:
(i) "AFFILIATE" of a Person means a Person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, the first mentioned
Person.
(ii) "AFFILIATED GROUP" means any affiliated
group within the meaning of Section 1504(a) of the Code or any similar
group defined under a similar provision of state, local or foreign law.
(iii) "CODE" means the Internal Revenue Code of
1986, as amended.
(iv) "CONTRACT" means any contract, agreement,
lease, license, sales order, purchase order, indenture, note, bond,
loan, instrument, lease, commitment or other arrangement or agreement
that is binding on any Person or any part of its property under
applicable Law.
(v) "CONTROL" (including the terms "controlled,"
"controlled by" and "under common control with") means the possession,
direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise.
(vi) "DIRECT CONTRACT" means any Contract between
Honeywell, the Company or any of their applicable Subsidiaries, on the
one hand, and any of the top 10 customers of the SPS Business, on the
other hand (measured by revenue during the first nine (9) months of
fiscal year 2005), relating to the operation of the business described
in clauses (B) and (C), taken as a whole, of the definition of "SPS
Business."
(vii) "DOJ" means the United States Department of
Justice.
(viii) "ERISA" means the Employee Retirement Income
Security Act of 1974, including the rules and regulations promulgated
thereto.
65
(ix) "ERISA AFFILIATE" means any entity which is,
or at any applicable time was, a member of (A) a controlled group of
corporations (as defined in Section 414(b) of the Code), (B) a group of
trades or businesses under common control (as defined in Section 414(c)
of the Code) or (C) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of
the Code), any of which includes or included the Company or any of the
Company's Subsidiaries. For the avoidance of doubt, "ERISA Affiliate"
does not include the Company or any of its Subsidiaries.
(x) "ERISA AFFILIATE LIABILITY" means any
Liability that arises under or relates to, any employee benefit plan or
arrangement other than a Plan or any non-material fringe benefit plan
or arrangement maintained by the Company or a Subsidiary, including any
plan which is subject to Title IV of ERISA which is or has been
maintained by any ERISA Affiliate.
(xi) "FTC" means the United States Federal Trade
Commission.
(xii) "GOVERNMENTAL AUTHORITY" means any foreign
or United States federal, state or local governmental, regulatory or
administrative agency or any court or tribunal or, with respect to any
specified Person, any arbitrator who has the authority to render a
binding decision on such Person that may be enforced in a court of
competent jurisdiction.
(xiii) "GOVERNMENTAL ORDER" means any order, writ,
judgment, injunction, decree, stipulation, determination or award
entered by or with any Governmental Authority.
(xiv) "INDEBTEDNESS" of any Person at any date
shall include (A) all obligations of such Person for borrowed money and
obligations issued or incurred in substitution or exchange for
obligations for borrowed money, (B) any other obligation of such Person
which is evidenced by any note, bond, letter of credit, debenture,
mortgage (including, for the avoidance of doubt, any indebtedness
evidenced by the deed of trust listed as a Permitted Encumbrance in
Attachment 10.2(a)(xxv) to the Disclosure Schedule) or similar debt
instrument, (C) all guarantees (including so-called take or pay or keep
well agreements) with respect to any indebtedness, obligation, claim or
Liability of any other Person of a type described in clauses (A)
through (B) above, (D) all other obligations of such Person under any
lease or similar arrangement required to be accounted for by the lessee
as a capital lease in accordance with GAAP, and (E) for clauses (A)
through (D) above, all accrued interest thereon, if any, and any
termination fees, prepayment, discharge or termination penalties,
"breakage" costs or similar payments associated with the repayments of
such Indebtedness on or prior to the Closing Date (provided that, for
the avoidance of doubt, accounts payable, trade payables and letters of
credit shall not deemed to be "Indebtedness" hereunder); PROVIDED,
HOWEVER, that, without limiting Honeywell's obligation to indemnify for
any Excluded Liability pursuant to Section 9.2(a), Honeywell's
66
obligations to indemnify Purchaser for Indebtedness at Closing shall
not apply to capital leases, letters of credit or surety bonds, except
to the extent, in the case of letters of credit, that amounts have been
drawn thereunder by the beneficiary thereof at Closing.
(xv) "INDEPENDENT ACCOUNTING FIRM" means KPMG LLP
or, if KPMG LLP is unwilling to serve, another mutually acceptable
nationally recognized firm of independent accountants that has not
provided services to either Honeywell or Purchaser or their Affiliates
in the preceding three (3) years, or if no such firm is available and
willing to serve, then a mutually acceptable expert in public
accounting, in each case, upon which Purchaser and Honeywell shall have
mutually agreed (or, if Honeywell and Purchaser are unable to agree, by
the American Arbitration Association sitting in New York City).
(xvi) "KNOWLEDGE" with respect to Honeywell means
the actual knowledge of the individuals identified in Section
10.2(a)(xvi) of the Disclosure Schedule or the knowledge that such
individuals should have reason to know in the reasonable exercise of
the duties of such individuals and after having reviewed the applicable
provisions of this Agreement.
(xvii) "LAW" means any law, statute, ordinance,
rule or regulation of any Governmental Authority, or any binding
agreement with any Government Authority.
(xviii) "LIABILITY" means any direct or indirect
liability, indebtedness, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, xxxxxx or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, known or
unknown, contingent or otherwise.
(xix) "LOSSES" means, subject to Section 9.4(c),
any costs or expenses (including reasonable attorneys' fees and
expenses), judgments, assessments, fines, claims, damages, lost profits
(but only to the extent that such lost profits would not be deemed to
constitute consequential damages) and diminution in value of the SPI
Group as measured against the Purchase Price (it being understood that
any diminution in value shall be calculated in accordance with the
principles described in Section 9.4(c)). Notwithstanding anything to
the contrary, for purposes of calculating the amount of any Loss (but
not for purposes of determining whether there has been a breach of a
representation or warranty) under Article IX, all references to
"material," "materiality," "SPS Material Adverse Effect" and the like
shall be disregarded.
(xx) "MADE AVAILABLE" means that the information
referred to (i) has been actually delivered to Purchaser or to its
outside legal counsel, (ii) was posted prior to the date of execution
of the Agreement on the electronic data site located at
xxxx://xxxxxxxx.xxxxxxx.xxx and which has been identified as a new
addition to such site for at least three (3) business days following
the date on which it is first made available and has not been modified
67
subsequently or (iii) was delivered by hand to Purchaser at least two
(2) days prior to the date of the execution of this Agreement.
(xxi) "NET WORKING CAPITAL" means, as of the
Closing Date, the excess of (i) the sum of total current assets and
prepaid rebates of the Company and its Subsidiaries (other than cash
and cash equivalents (except to the extent contemplated by Section
5.18), any current income Tax assets and any intercompany assets
between or among the Company and its Subsidiaries), over (ii) total
current liabilities (including outstanding checks) of the Company and
its Subsidiaries (which, for the avoidance of doubt, shall exclude
current liabilities for income Taxes and any intercompany liabilities
between or among the Company and its Subsidiaries). The current assets,
current liabilities and prepaid rebates of the Company and its
Subsidiaries that are included in Net Working Capital shall be
calculated in accordance with the Specified Accounting Policies,
consistently applied, and in accordance with the calculation of the
sample statement of Net Working Capital set forth in Section
10.2(a)(xxx) of the Disclosure Schedule.
(xxii) "OFF-THE-SHELF SOFTWARE" means off-the-shelf
personal computer software, as such term is commonly understood, that
is commercially available under non-discriminatory pricing terms on a
retail basis for less than $500 per seat and $50,000 in the aggregate,
and used solely on the desktop personal computers of the Company or a
Subsidiary.
(xxiii) "PARTNER CONTRACT" means any Contract
between Honeywell, the Company or any of their applicable Subsidiaries,
on the one hand, and any of the top 25 customers of the SPS Business,
on the other hand (measured by revenue during the first nine (9) months
of fiscal year 2005), in connection with the operation of the business
described in clause (A) of the definition of "SPS Business".
(xxiv) "PERMIT" means any permit, franchise,
authorization, license or other approval issued or granted by any
Governmental Authority.
(xxv) "PERMITTED ENCUMBRANCES" means (A)
mechanics', carriers', workmen's, repairmen's or other like
Encumbrances arising or incurred in the ordinary course of business for
amounts not yet delinquent or which are being contested in good faith
by appropriate legal proceedings and with respect to which appropriate
reserves (if required by GAAP, determined as of the date hereof and as
of the Closing) are being held by the Company or its Subsidiaries, (B)
Encumbrances arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the
ordinary course of business, (C) Encumbrances for Taxes and other
governmental charges that are not due and payable, are being contested
in good faith by appropriate proceedings or may thereafter be paid
without penalty and with respect to which appropriate reserves (if
required by GAAP, determined as of the date hereof and
68
as of the Closing) are being held by the Company or its Subsidiaries,
(D) matters disclosed in Section 10.2(a)(xxv) of the Disclosure
Schedule, as such section may be updated, subject to Purchaser's
reasonable approval, by the title company prior to Closing and (E)
imperfections of title, restrictions or encumbrances, if any, which
Encumbrances, imperfections of title, restrictions or other
encumbrances do not, individually or in the aggregate, materially
impair the continued use and operation of the specific assets to which
they relate.
(xxvi) "PERSON" means an individual, corporation,
partnership, limited liability company, association, trust,
unincorporated organization, entity or group.
(xxvii) "PURCHASER MATERIAL ADVERSE EFFECT" means
any material adverse change in or material adverse effect on the
ability of Purchaser to perform its obligations under this Agreement or
to consummate the transactions contemplated hereby.
(xxviii) "REFERENCE DATE" means March 31, 2005.
(xxix) "SELF-HELP MECHANISM" means any back door,
time bomb, drop dead device, or other software routine designed to
disable a computer program automatically with the passage of time or
under the positive control of a Person other than an authorized
licensee or owner of a copy of the program or the right and title in
and to the program.
(xxx) "SPECIFIED ACCOUNTING POLICIES" means the
accounting policies, practices and procedures applied on a basis
consistent with the sample statement of Net Working Capital set forth
in Section 10.2(a)(xxx) of the Disclosure Schedule.
(xxxi) "SPS BUSINESS" means (A) (i) the business of
producing, supplying and delivering checks, check-related and other
products, offering services related thereto, conducting and operating
customer contact centers and Internet websites related thereto and
engaging in direct marketing of products and services to financial
institutions and their customers, and (ii) the business of Xxxxxx
Xxxxxx, in each case as currently and specifically contemplated to be
conducted under the "Financial Institution" division of the Company and
its applicable Subsidiaries, including under the "Xxxxxx American"
brand name, the "Xxxxxx Xxxxxx" brand name and any other brand names
used or to be used in connection with such business, (B) the business
of producing, supplying and delivering checks, check-related and other
products, offering services related thereto, conducting and operating
customer contact centers and Internet websites related thereto, and
engaging in marketing of products and services to consumers including
through mail, newspaper, Internet and magazine-based advertising, as
currently and specifically contemplated to be conducted under the
"Direct" division of the Company and its applicable Subsidiaries,
including under the "Checks in the Mail" brand name and any other brand
name used or to be used in
69
connection with such business, and (C) the business of producing,
supplying and delivering checks, business forms/kits, treasury
management services and other products, offering services related
thereto, conducting and operating customer contact centers and Internet
websites related thereto and engaging in direct marketing of products
and services to businesses, as currently and specifically contemplated
to be conducted under the "Direct" division of the Company and its
applicable Subsidiaries, including under the "B2Direct" brand name and
any other brand used or to be used in connection with such business.
(xxxii) "SPS MATERIAL ADVERSE EFFECT" means any
change, effect, circumstance, event, development or condition that,
individually or in the aggregate, has had, or would reasonably be
expected to have, a material adverse effect on the business, assets,
properties, results of operations or condition (financial or otherwise)
of the SPS Business taken as a whole; PROVIDED, HOWEVER, that changes,
effects or circumstances, alone or in combination, that directly arise
out of or result directly from (A) changes in economic conditions or
financial or securities markets in general or in the industries and
markets in which the SPS Business operates (provided that such changes
do not disproportionately affect the SPS Business relative to the other
participants in its industry), (B) the execution and performance of
this Agreement or (C) the announcement of this Agreement and the
transactions contemplated hereby shall not be deemed to constitute an
SPS Material Adverse Effect; provided, FURTHER, that the exception set
forth in clause (B) above shall not apply to the condition set forth in
Section 6.2(a) (or, to the extent it relates to Section 6.2(a), Section
6.2(c)) to the extent related to the representations and warranties set
forth in Section 3.3.
(xxxiii) "SUBSIDIARY" of a Person means any
corporation or other legal entity of which such Person (directly or
indirectly, either alone or through or together with any other
Subsidiary or Subsidiaries) is the general partner or managing entity
or of which at least a majority of the stock or other equity interests
the holders of which are generally entitled to vote for the election of
the board of directors or others performing similar functions of such
corporation or other legal entity is directly or indirectly owned or
controlled by such Person (either alone or through or together with any
other Subsidiary or Subsidiaries). Unless otherwise stated herein,
"Subsidiary" shall refer to a Subsidiary of the Company.
(xxxiv) "TAX RETURN" means any report, return or
similar filing (including the attached schedules) required to be filed
with respect to Taxes, including any information return, claim for
refund, election, disclosure, amended return, or declaration of
estimated Taxes.
(xxxv) "TAXES" means (i) any and all domestic or
foreign, federal, state, local or other taxes, levies, fees, imposts,
or duties of any kind (together with any and all interest, fines,
assessments, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any Governmental Authority, including,
without limitation (x) taxes with respect to
70
income, franchises, windfall or other profits and gross receipts and
(y) real or personal property, sales, use, goods and services, capital
stock, employment, unemployment, social security, unclaimed property,
payroll, customs duties, transfer, license, branch, utility, severance,
production, occupation, premium, workers' compensation or net worth,
capital gains and taxes in the nature of excise, withholding, ad
valorem or value added; and (ii) any transferee liability in respect of
any items described in clause (i) above.
(xxxvi) "TAXING AUTHORITY" means the IRS and any
other domestic or foreign Governmental Authority responsible for the
administration or collection of any Taxes.
(xxxvii) "UNAUTHORIZED CODE" means any virus, trojan
horse, worm, or other software routines or hardware components designed
to permit unauthorized access; or to disable, erase, or otherwise harm
any computer, systems or software.
(b) When a reference is made in this Agreement to
Articles, Sections, or Disclosure Schedule, such reference is to an Article or a
Section of, or Disclosure Schedule to, this Agreement, unless otherwise
indicated. When a reference is made in this Agreement to a party or parties,
such reference is to parties to this Agreement, unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be understood to be followed by the words "without
limitation." When a reference is made in this Agreement to this "Agreement,"
such reference is to this Agreement, the Disclosure Schedule and any side letter
or other document referred to in Section 10.4 of this Agreement.
10.3 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon a determination that any term or other provision is
invalid, illegal or incapable of being enforced, Honeywell and Purchaser shall
negotiate in good faith to modify this Agreement so as to effect their original
intent as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
10.4 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, including all exhibits and schedules attached hereto, the Disclosure
Schedule, the Confidentiality Agreement and any certificate or side letter
delivered in connection herewith (that is referenced as a certificate or side
letter delivered under this Agreement) constitute the entire agreement and
supersede any and all other prior agreements and undertakings, both written and
oral, among the parties hereto, or any of them, with respect to the subject
matter hereof and does not, and is not intended to, confer upon any
71
Person (other than the Purchaser Indemnified Parties pursuant to Section 9.2)
any rights or remedies hereunder.
10.5 AMENDMENT; WAIVER. This Agreement maybe amended only in a
writing signed by all parties hereto. Any waiver of rights hereunder must be set
forth in writing. A waiver of any breach or failure to enforce any of the terms
or conditions of this Agreement shall not in any way affect, limit or waive
either party's rights at any time to enforce strict compliance thereafter with
every term or condition of this Agreement.
10.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors. Notwithstanding the foregoing, this Agreement
shall not be assigned by any party hereto by operation of Law or otherwise
without the express written consent of each of the other parties; PROVIDED,
HOWEVER, that (i) Purchaser may, at its election and provided it remains liable
for its obligations hereunder, assign its rights (but not its obligations) under
this Agreement to any Affiliate of Purchaser (or to any successor to Purchaser
by way of merger or otherwise) and (ii) Purchaser or any such assignee may make
a collateral assignment of its rights (but not its obligations) under this
Agreement to any lender providing financing in connection with the transactions
contemplated hereby.
10.7 DISCLOSURE SCHEDULE. The Disclosure Schedule shall be
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein. Any matter disclosed pursuant to
the Disclosure Schedule shall not be deemed to be an admission or representation
as to the materiality of the item so disclosed.
10.8 GOVERNING LAW. Any and all claims, disputes or controversies
in any way arising out of or relating to (a) this Agreement, (b) any breach or
termination of, or the validity of, this Agreement, (c) the transactions
contemplated hereby or (d) any discussions or communications relating in any way
to this Agreement or any transactions contemplated hereby, and the existence or
validity of any and all defenses to such claims, disputes or controversies,
shall be governed and resolved exclusively by the laws of the State of New York,
notwithstanding the existence of any conflict of laws principles that otherwise
would dictate the application of any other State's law. Each party irrevocably
and unconditionally waives any right to object to the application of New York
law, or argue against its applicability to any of the matters referenced in the
immediately preceding sentence.
10.9 DISPUTE RESOLUTION; MEDIATION; JURISDICTION.
(a) In the event of any dispute, controversy or claim
arising out of or relating to this Agreement or the breach, termination or
validity thereof, or the transactions contemplated hereby (a "DISPUTE"), upon
the written notice of either party hereto, the parties hereto shall attempt to
negotiate a resolution of the Dispute. If the parties hereto are unable for any
reason to resolve a Dispute within 30 days after the receipt of such notice, the
Dispute shall be submitted to mediation in accordance with Section 10.9(b)
hereof.
72
(b) Any Dispute not resolved pursuant to Section 10.9(a)
hereof shall, at the request of either party hereto (a "MEDIATION REQUEST"), be
submitted to non-binding mediation in accordance with the then current CPR
Mediation Procedure (the "PROCEDURE"), except as modified herein. The mediation
shall be held in New York, New York. The parties shall have 20 days from receipt
by a party of a Mediation Request to agree on a mediator. If no mediator has
been agreed upon by the parties within 20 days of receipt by a party (or
parties) of a Mediation Request, then any party may request (on written notice
to the other parties), that the CPR appoint a mediator in accordance with the
Procedure. All mediation pursuant to this clause shall be confidential and shall
be treated as compromise and settlement negotiations, and no oral or documentary
representations made by the parties during such mediation shall be admissible
for any purpose in any subsequent proceedings. No party hereto shall disclose or
permit the disclosure of any information about the evidence adduced or the
documents produced by the other parties in the mediation proceedings or about
the existence, contents or results of the mediation without the prior written
consent of such other parties except in the course of a judicial or regulatory
proceeding or as may be required by Law or requested by a Governmental Authority
or securities exchange. Before making any disclosure permitted by the preceding
sentence, the party intending to make such disclosure shall give the other
parties reasonable written notice of the intended disclosure and afford the
other parties a reasonable opportunity to protect its interests. If the Dispute
has not been resolved within 60 days of the appointment of a Mediator, or within
90 days of receipt by a party of a Mediation Request (whichever occurs sooner),
or within such longer period as the parties may agree to in writing, then any
party may file an action on the Dispute in any court having jurisdiction in
accordance with Section 10.9(c).
(c) Each of the parties hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and the courts of the United States of America located
in the State of New York for any litigation arising out of or relating to this
Agreement or the transactions contemplated hereby or any of the other
transactions contemplated hereby (and agrees not to commence any litigation
relating hereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail to its respective
address set forth in Section 10.1, shall be effective service of process for any
litigation brought against it in any such court. Each of the parties hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any litigation arising out of this Agreement or the transactions contemplated
hereby or any of the other transactions contemplated hereby in the courts of the
State of New York or the courts of the United States of America located in the
State of New York and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such litigation brought
in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO
TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY OF THE
OTHER TRANSACTIONS CONTEMPLATED HEREBY.
73
10.10 CERTAIN TRANSACTIONS.
(a) At or prior to the Closing, Honeywell shall cause the
Company, Novar Investments (USA), Inc., Novar Finance Inc. and Novar Holdco Inc.
to consolidate pursuant to one or more mergers reasonably acceptable to
Purchaser such that, following such consolidation, Security Printing, Inc. is a
direct, wholly owned Subsidiary of the Company, with the other corporations
ceasing to exist; PROVIDED, HOWEVER, that Honeywell shall not have any
obligation under this sentence if Honeywell elects to effect, and thereafter
effects, the Restructuring Transactions.
(b) Promptly following the Closing, Purchaser shall, to
the extent the Company continues to exist as a separate entity, change its name
to a name that makes no reference to "Novar". Purchaser acknowledges and agrees
that, as between Honeywell and Purchaser, Honeywell is retaining all rights to
the name "Novar."
10.11 CERTAIN ACTIONS At or prior to the Closing, Honeywell shall
take (or cause to be taken) either the series of actions set forth below in
Section 10.11(a) or the series of actions set forth below in Section 10.11(b),
as it determines in its sole discretion (and with reasonable notice to
Purchaser):
(a) Honeywell shall cause the following actions
(collectively, the "RESTRUCTURING TRANSACTIONS") to occur in the following order
(such that following the completion of the Restructuring Transactions, the
Company and its Subsidiaries shall have no Liability on or after the Closing
with respect to the Novar Guarantees and the Other New Guarantees):
(i) Each of Novar Holdco Inc. and Novar
Investments (USA) Inc. shall be converted into Delaware limited
liability companies in accordance with the applicable provisions of the
Delaware General Corporation Law.
(ii) Novar Finance Inc. shall either be (A)
converted into a Delaware limited liability company in accordance with
the applicable provisions of the Delaware General Corporation Law or
(B) merged with and into Novar Investments (USA) Inc.
(iii) Novar Holdco Inc. shall distribute all of
the outstanding shares of capital stock of Security Printing, Inc. to
Novar Finance Inc. or, if Novar Finance Inc. has been merged with and
into Novar Investments (USA) Inc., to Novar Investments (USA) Inc.
(iv) Novar Finance Inc., to the extent that it
has not been merged with and into Novar Investments (USA) Inc., shall
distribute all of the outstanding shares of capital stock of Security
Printing, Inc. to Novar Investments (USA) Inc.
74
(v) Novar Investments (USA) Inc. shall
distribute all of the outstanding shares of capital stock of Security
Printing, Inc. to Novar USA Inc.
(vi) All of the outstanding limited liability
company interests in Novar Investments (USA) Inc. (as converted) held
by Novar USA Inc. shall be distributed to Honeywell.
(b) Honeywell (and, to the extent applicable, Purchaser)
shall take the following actions:
(i) As security for the performance of the
indemnification obligations of Honeywell under Section 9.2(a)(iv) with
respect to the Novar Guarantees and any other guarantee (the "OTHER NEW
GUARANTEES") given by the Company, Novar Investments (USA) Inc., Novar
Finance Inc. or Novar Holdco Inc. or any of their Subsidiaries (other
than Security Printing, Inc. and its Subsidiaries) to the extent
unrelated to the SPS Business (in each case other than any such
guarantees as to which Novar Holdco Inc. (or the Company or any of its
Subsidiaries, as the case may be) shall have been released and
discharged from all Liabilities under any such guarantee on or prior to
the Closing Date), Honeywell shall deliver to Purchaser an irrevocable
letter of credit, in a form reasonably acceptable to Honeywell and
Purchaser, issued by an Eligible Bank, in the initial face amount equal
to the lesser of (i) $60,000,000 and (ii) the aggregate amount as may
be necessary to secure the maximum exposure under such guarantees, as
reasonably agreed upon by Honeywell and Purchaser (the "LETTER OF
CREDIT"). "ELIGIBLE BANK" means a banking, financial or other similar
institution capable of issuing the Letter of Credit (i) the
Dollar-denominated long-term senior unsecured debt obligations of which
shall be rated at least AA by S&P and Aa2 by Xxxxx'x and (ii) which
maintains an office in New York City at which the Letter of Credit may
be drawn.
(ii) Purchaser shall deliver a written notice to
Honeywell at least two (2) business days prior to drawing down any
amounts under the Letter of Credit, which notice shall specify the
amount to be so drawn down and shall include a copy of the notice of
the demand for payment (or description thereof to the extent such
notice has not been delivered in writing) received by Purchaser (or its
Affiliates) from the beneficiary under the applicable guarantee.
Purchaser shall be entitled to draw upon the Letter of Credit only if
and to the extent Honeywell has not paid to Purchaser the amount to be
so drawn down (as specified in such notice) within two (2) business
days of Honeywell's receipt of such notice from Purchaser. To effect a
draw down, Purchaser shall deliver a sight draft to the issuer of the
Letter of Credit (with a copy to be delivered to Honeywell
simultaneously) in the amount to which it is entitled pursuant to this
Section 10.11(b)(ii), together with a certificate signed by a Vice
President or the General Counsel of Purchaser which certifies (A) the
amount to which Purchaser is entitled to draw upon pursuant to this
Section 10.11(b)(ii), (B) that Purchaser has complied with its
obligation to deliver the notice described in
75
the first sentence hereof and (C) that Purchaser has not received any
payment in respect of the demand for payment specified in such notice
from Honeywell prior to the expiration of the two (2) business day
period described above. In the event that Honeywell makes an
indemnification payment within the two (2) business day time period
referred to above or Purchaser draws upon the Letter of Credit,
Purchaser acknowledges and agrees (on behalf of itself and its
Affiliates) that, (A) such payment or draw down, as applicable, shall
be in full satisfaction of Honeywell's obligations with respect to the
amount of such claim under such guarantee, (B) Honeywell shall be
subrogated, to the extent of such payment or draw down, as applicable,
to any rights that Purchaser or the applicable guarantor may have
against the beneficiary under the applicable guarantee with respect to
the subject matter (including the validity) of such claim for which an
indemnity payment was made or draw down occurred, and (C) Purchaser
shall take (or cause to be taken), at Honeywell's expense, such actions
as Honeywell may reasonably request to perfect such subrogation or to
pursue such rights against such beneficiary as Purchaser or the
applicable guarantor may have with respect thereto (it being understood
that in no event shall Purchaser be required to provide more than
reasonable cooperation in connection with any litigation, arbitration
or similar proceeding).
(iii) Honeywell's obligation to maintain the
Letter of Credit shall continue until the second anniversary of the
Closing Date (the "L/C TERMINATION DATE"); PROVIDED, that (A) the
expiration date of the Letter of Credit may be a date prior to the L/C
Termination Date if the terms of the then existing Letter of Credit
allow for it to be drawn down in full at or prior to its expiration
date unless Honeywell has put in place, at least thirty (30) days prior
to the expiration date of the then existing Letter of Credit, a
substitute letter of credit containing the same terms and conditions as
the then existing Letter of Credit in the then-existing face amount
issued by an Eligible Bank which shall take effect no later than the
expiration date of the then existing Letter of Credit and shall
thereafter be deemed to be the Letter of Credit and (B) if the issuing
bank of the then existing Letter of Credit is no longer an Eligible
Bank, then Purchaser shall be permitted to draw down in full such
Letter of Credit unless Honeywell has put in place within thirty (30)
days of such event a substitute letter of credit containing the same
terms and conditions as the then existing Letter of Credit in the then
existing face amount issued by an Eligible Bank, which shall thereafter
be deemed to be the Letter of Credit. In the event that Purchaser so
draws down upon the Letter of Credit, Purchaser shall hold any funds so
received in escrow, drawing down on such escrowed funds only to the
extent it could have so drawn down under the Letter of Credit and
returning to Honeywell on the L/C Termination Date or, if applicable,
such earlier date when the face amount of the Letter of Credit would
have been reduced to zero (0) in accordance with the terms hereof, any
funds not so drawn down upon by the L/C Termination Date or, if
applicable, such earlier date.
(iv) If and at such time after the Closing Date
as events shall occur (such as any of the applicable guarantors shall
have been released or
76
discharged from all Liabilities under the applicable guarantee (whether
or not in connection with any substitution or assumption by another
Person thereunder) or the obligations underlying the applicable
guarantee shall have expired) reducing the maximum aggregate exposure
under all Novar Guarantees and Other New Guarantees, Honeywell and
Purchaser shall discuss in good faith an appropriate reduction in the
face amount of the Letter of Credit based on the aggregate amount as
may be necessary to secure the maximum aggregate remaining exposure
under the remaining Novar Guarantees and Other New Guarantees.
Similarly, if and at such time after the Closing events shall occur
(such as the parties identify any additional Other New Guarantees)
increasing the maximum aggregate exposure under all Novar Guarantees
and Other New Guarantees, Honeywell and Purchaser shall discuss in good
faith an appropriate increase in the face amount of the Letter of
Credit based on the aggregate amount as may be necessary to secure the
maximum exposure under such newly identified guarantee(s); PROVIDED,
that any such increase in the face amount of the Letter of Credit shall
not be for an amount greater than $60,000,000 (less any amounts that
have been previously drawn under the Letter of Credit and less any
indemnification payments made by Honeywell to Purchaser described in
sub-section (ii) above). Once any new face amount for the Letter of
Credit is determined pursuant to this Section 10.11(b)(iv), Honeywell
and Purchaser shall deliver a certificate to the issuer of the Letter
of Credit certifying that, pursuant to the provisions of this Section
10.11, the face amount of the Letter of Credit may be increased or
reduced (as the case may be) and the new face amount then required
under this Section 10.11(b). The parties shall, thereafter, cooperate
in amending the face amount of the Letter of Credit.
(c) The parties acknowledge and agree that even if
Honeywell is required to maintain a Letter of Credit under Section 10.11(b),
Honeywell shall still be permitted to effect the Restructuring Transactions so
as to minimize the face amount of any Letter of Credit required to be maintained
by Honeywell pursuant to Section 10.11(b).
(d) Purchaser acknowledges and agrees that Honeywell may
effect any alternative structure or variation(s) of the Restructuring
Transactions that accomplishes the intent and purposes of Section 10.11(a);
PROVIDED that, prior to effecting any such alternative structure or
variation(s), Honeywell shall review and discuss such alternative structure or
variation(s) with Purchaser and Purchaser shall not have objected thereto (which
objection may not be made unless such structure or variation(s) is reasonably
expected to have an adverse impact on Purchaser) within five (5) business days
of Honeywell's initial notification to Purchaser of such alternative structure
or variation(s). To the extent Purchaser does not object to such alternative
structure or variation(s) within such time period, the parties shall cooperate
to take such actions as may be reasonably necessary or appropriate to implement
any such alternative structure or variation(s), in lieu of the actions described
above.
77
(e) Nothing contained in this Section 10.11 shall affect
Purchaser's rights to indemnification for any Excluded Liability, including the
Novar Guarantees or the Other New Guarantees.
(f) The parties agree and acknowledge that the
Restructuring Transactions, if effected, shall result in Novar Investments (USA)
Inc., Novar Financial Inc. and Novar Holdco Inc. becoming Subsidiaries of
Honeywell and not the Company at Closing and, for the avoidance of doubt, the
representations and warranties of Honeywell concerning such entities shall not
be deemed inaccurate solely as a result the fact that such entities are no
longer Subsidiaries of the Company at Closing. For purposes of post-closing
administration of the Subsidiaries (such as confidentiality obligations, access
to and preservation of books and records and the like), such entities shall be
deemed Subsidiaries of Honeywell and not the Company if the Restructuring
Transactions are effected.
10.12 CONSTRUCTION. The headings of Articles and Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. The language used in this Agreement is the language chosen by
the parties to express their mutual intent, and no rule of strict construction
shall be applied against any party.
10.13 COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts (including by facsimile or electronic .pdf submission),
and by the different parties in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
[SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
M & F WORLDWIDE CORP.
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
--------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
HONEYWELL INTERNATIONAL INC.
By:/s/ Xxxx X. Xxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxx
--------------------------------------
Title: VP, Corporate Planning & Development
------------------------------------
